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34 minutes | 6 hours ago
Roberto Oliveira On Selling His Company For $35 Million And Then Buying It Back
Roberto Oliveira has founded, bought, and funded multiple startups. He seems to have great intuition when it comes to seeing what the next big thing is in tech. Now he is betting on a new form of digital asset your company needs. He is the founder of Take which operates in the mobility market in Brazil. In this episode, you will learn: The ‘Intelligent Contact’ Roberto Oliveira’s top advice before starting a business for both Brazilian and international entrepreneurs What an effective feedback loop looks like SUBSCRIBE ON: For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here). Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below. About Roberto Oliveira: Co-founder and CEO of Take, Roberto Oliveira has been operating for 18 years in the Latin American market of messages and mobile content. As an ADMR partner, Roberto has 20 years of experience creating and developing technology companies. Roberto is also co-founder and board member of Confrapar, Minutrade, and POP Recarga. Graduated in Electrical and Telecommunications Engineering from UFMG, he has also studied Finance at IbMec and Executive Education, Innovation and Entrepreneurship at Stanford University. Connect with Roberto Oliveira: Crunchbase LinkedIn * * * FULL TRANSCRIPTION OF THE INTERVIEW: Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we’re going to be speaking with a really exciting founder, a founder that has been able to capture and see trends before anyone and even opening new markets in Brazil. But without further ado, I don’t want to make anyone wait any longer, and I’d like to welcome our guest today, Roberto Oliveira. Welcome to the show. Roberto Oliveira: Hi, Alejandro. Nice to meet you. Thank you for having me here. It is a great pleasure to be here. Alejandro: So born in São Paulo and then moved to Belo Horizonte. Tell us about life growing up in an entrepreneurial household. Roberto Oliveira: Yes. I was born in a city that’s called [2:04], a tech city here in Brazil. It’s where we have [2:11]. That’s a very important Brazilian company, and there we have our space research. The National Institute is where my father worked. My father and my mother met in Belo Horizonte in the city that I live today. As soon as they got married, they decided to move to São José dos Campos because my father was invited to work on this Brazilian NASA that’s called INPE. That’s where I started. My father was a scientist. He was working with space research. They were trying to understand climate change and how to project the weather. That’s the beginning of my life. Alejandro: Your first computer, you got it from your father. It’s amazing the amount of influence that you see from your father, someone that even before tech was a thing, he had his own tech company there in Brazil. What were some of those lessons that you learned from your dad that you definitely carried away as part of your own entrepreneurial journey? Roberto Oliveira: It was really interesting. First of all, to see a scientist here in Brazil and for me to develop and try to create new things and understand how everything works was inside of my home. Every time my father incentivizes my brother and me to work with tech and understand the electronic engineering, so they gave us a computer – I think I was ten years old. Since that, we started to make some codes and create some things. He was working in INPE, the National Space Research Institute, but when they decided to move back to Belo Horizonte, that’s the city where I live today, he decides to start his company, and he found a tech company. He started to build very interesting things. It was a second or first time to see – he was working in this scientific thing and talking about how to understand space. It’s really challenging. After that, he became an entrepreneur, and he started his company. At the very beginning, he was able to close the first deal. I started working with him. When I turned 15 years old, he started taking me with him to the company. It was very teachable for me, and I learned a lot of things with him. Alejandro: And this was definitely a really good combination that you did with your own studies at university because the university was all about studying entrepreneurship. So not a bad combination of both things. Roberto Oliveira: Yes. I worked in his company. Before the university, I studied electronics. I became an electronic technician, and I was manufacturing some electronic products with him. After that, I went into electronic engineering at the university, but when I was at the university, I was having the engineering disciplines, but I started to have some classes in entrepreneurship, and I started to study about marketing, about sales, and I started to ask and incentivize him to invest in marketing and sales and do everything that’s all [6:45] companies do. But he is very conservative, and he’s basically a scientist, a tech guy that preferred to work and build their products and sell in not so much a [7:02]. So it was a frustration for me because I was not able to convince him to invest in marketing and sales. So I started thinking about creating my own company. As soon as I finished at the university, I created my first company, which was a mobile phone store. Alejandro: Very nice. Let’s talk about the retail of selling mobile phones, and this was your first baby after coming out of university. Tell us about starting this business. It’s interesting how you have always been with family when building companies, but tell us about this first rodeo. Roberto Oliveira: I had two partners. One is one of my uncles, my father’s brother. A friend that I met in Brazilian [8:00]. That was a very interesting time because the mobile phone was not as it is today. It was the very beginning. It was 1997. It was basically used to make phone calls. Somehow, I don’t know why, we really understood that it could be a very big market, and we had a very good start selling mobile phones. It made us get very close to the mobile carriers. We were very successful. We became the second most important reseller here in our town. Because of that, we became very close with the mobile carriers. They started to incentivize us to build other things. They introduced us to Nokia, that was, at that time, the main mobile phone manufacturer. At that time, we created our second company that’s called [9:11], that was a Nokia service center, and we became very close with Nokia too. Because of those relationships, we decided to create Take, which is the company that we are discussing today. Alejandro: Let’s talk about Take because with Take, having that access to be able to listen, being able to see the market unfold, one thing that you were able to accomplish there and envision was a world in Brazil where you could bring the first mobile internet company. So, how was that? Roberto Oliveira: Yes. We were very close to Nokia. Nokia was pushing WAP, a wireless application protocol that was a technology that was the first attempt to create a mobile internet. At the same time, the mobile carriers were investing on digital networks. So both the mobile carriers and Nokia start to talk about the mobile internet. That time was 1999, and we were living in the internet bubble, so there was a lot of excitement around the internet. We decided to bet that that technology could work and we would help to build a mobile internet. But what happened was that WAP did not work, but we were very lucky because the people from Nokia asked us to build a ringtone download platform. So they came to us and said, “As you are talking about mobile internet, why not create a ringtone download platform. As you are working with WAP, probably you are able to build this ringtone download platform.” So we decided to invest. One thing that’s really interesting is that at that time we were very close to the consumers because of the stores. We had ten retailer stores, and we were having the feeling of the people using the phones. So when they came to us to talk about ringtone, we made a test inside the store showing the consumers the possibility of downloading a ringtone, and we got very good feedback from them, so we decided to invest and created a platform, and we were very successful with that. When we created the platform, we started to build a platform in 1999 and to tell them when we made the first ringtone downloads. We had a monopoly; we closed deals with 13 mobile carriers, and we were able to grow at a 250% growth rate from 2001 to 2005, so it was a very interesting and exciting moment for us at that time. Alejandro: This was also your first experience raising money because there was a Japanese company that came knocking. What happened there? Roberto Oliveira: Yes, that’s interesting because we were approached by more than seven investors. We tried to raise money with seven investors, and it didn’t work. I think that it was because the company was growing very fast. We received this offer from a Japanese company, but they decided to buy 100% of the company. So, in March of 2005, we sold 100% of the company for 35 US million dollars. It was a very good deal at that time. Alejandro: This was all pretty much bootstrapped, so you hadn’t raised any money, and it was pretty much all going to your pockets. Is that right? Roberto Oliveira: Yeah. Alejandro: That’s amazing. Roberto Oliveira: It was too much money to not sell the company. Alejandro: Yeah. So what happened after this? Roberto Oliveira: After that, using this money we created another company, so we found Minutrade, that’s a company that works from micro rewards, and today it is a very good and important company here in Brazil, too. We found Confrapar, that’s a venture capital firm. In Confrapar we are running fast in more than 20 companies. In 2008, we bought back Take. Alejandro: Very nice. Tell us about this because it’s strange. When you sell your company, and you buy the company again. What prompted you guys to do that? Roberto Oliveira: Yes, it’s funny because we were not waiting for that. It was a complete surprise for us, but the Japanese called us telling us that they had 30 days to sell the company back to us. After we sold the ringtone, the market crashed in all of the world. The technology and business model changed, so they were suffering. They had bought companies in the USA, Europe, China, and other countries, so they started to suffer a lot, including in Japan. So in 2008, they decided to sell all the foreign companies that they had bought and try to reinvent the company in Japan. When they called us, they were selling the other companies and Take was the last one. We said, “We can sell the company for you because the company is very good.” But they said, “We don’t have time. We’re flying to Belo Horizonte.” They came, and we closed the deal in a week. It was a very fast decision, and at the time, it was a surprise, but after that, we saw it as an opportunity. We liked the people; we liked the platforms that we had, and we bought it back. It was a very good decision. Alejandro: Wow. Then, what happened after because you bought the company back? And then, in 2014, there’s a big breakthrough moment where literally you guys create a new vision for this. Roberto Oliveira: Yeah. Exactly. We bought Take back in 2008, and we were able to make the company grow again, basically building SMS apps. But in 2014, we had an important moment in Take where we decide to bet in a vision that the messaging platforms like WhatsApp probably would become the next most important channels for brands to interact with consumers. So we realized at that time that if they open an API and allow us to help the brands to do the same kind of things that we were doing when we were selling ringtones in 2001, probably we would be able to create some amazing things. We invented a concept that we called an intelligent contact because we understood that those channels are conversational, and in the digital world, the conversations happen between two contacts. For now, the contacts inside those messages are the next and the new digital assets that all the brands will need to have. So we proposed a new architecture based in a strategy where instead to think in omnichannel strategy, you’ll think in one contact architecture. Using our platform, you are able to build these digital assets and publish this in all the conversational channels likes WhatsApp, Apple Business Share, Google Business Masses, Google Systems, SMS, your website, your app. So it starts to work in this platform in 2014. We created some solutions using web views. But in 2016, Facebook opened the Facebook Messenger, and we created the first big cases with big enterprise on Facebook Messenger. In August 1, 2018, the original vision realized that with WhatsApp opening their API, and since that, we started growing at a very fast pace again. We have amazing momentum now and doubled from 2018 to 2019. We double again to 2020, and our expectation is to deliver again in 2021. That is the momentum that we are living here. Alejandro: Well, doubling is definitely a good thing. The model of the business has changed quite a bit since you guys started, and now, after the new vision and the new events that have happened, what ended up becoming the business model of Take and how do you guys make money – for the people that are listening to get it? Roberto Oliveira: Our business model is based in mindfully active users or mindfully active subscribers or consumers that interact with your contacts through one of those channels. For each consumer that interacts with your contacts inside WhatsApp or inside Google Business Masses or in any other channel, we charge a very small fee, and we are able to transform all those conversations in just one conversation that we call infinite conversations that each brand can have and keep this conversation running using our platform. Alejandro: In this case, for you guys just recently, Warner Pacos just made a pretty big investment. Why did you decide that it was the time to raise some money for this? Roberto Oliveira: The company has a very good size. We are generating 40 million dollars in recurring revenue ARR. As I told earlier, we are doubling this, so we expect at the end of next year to be generating more than 80 million dollars as our recurring revenue. We are doing that only in Brazil. What we are seeing is this solution working in any part of the world. We are receiving very good feedback from our partners, so one thing that’s really interesting is that at the beginning, our partners were the mobile carriers. Now, our partners are Google, Apple, Facebook, Amazon, and Microsoft. So, we have very good relationships with all those big tech companies, and they are channels, and we are able to publish our brand in any part of the world inside those channels. We are seeing a huge opportunity that’s much bigger than we saw when we started doing ringtones or when we were working with SMS. Now we are seeing something that’s really big, and we understand that we have a very good product with a unique architecture, and it can work in all the world. So we look for some money. We have the help of some investment banks. We received very good feedback during the process, too, and we were able to raise these rounds. We are really excited, and we have a lot of things to do. We push really hard to accelerate the product roadmap. We are investing a lot in our marketing and sales team. So we intend to accelerate and create something that could be real big. And this market is really exciting and active this time. You saw that Salesforce bought Slack; Facebook bought Customer; Cisco bought IM Mobile; There are a lot of things happening in this sector. Alejandro: Where do you think that the market is going as a whole, Roberto? Roberto Oliveira: Our vision is that, as I mentioned, for us, this market is the new digital assets that all the brands will need to have. At the beginning of the web, the first digital asset that any brand decides to create [23:48] was a website. Today, you have more than 200 million active websites on the web. In the smartphone, the company starts to build another digital asset that is the mobile app. Almost all the brands invested in our work in their mobile apps. And now, we have no doubts that all the brands – it doesn’t matter the size, whether it’s a huge mobile carrier or a huge bank or a small retail store or local retail store, we believe that all those brands will have as much contents. The right way to look to that and work with that is using what we call a software mindset and implement a process where each month you launch a new version. And you are building assets, so you are working in lots of integrations, lots of automations, lots of workflows to be able to deliver a good experience for their customers. We believe in our vision. All the brands in all the world will have as our contacts, and we think that our product has a unique architecture that’s really working here in Brazil, and we can have a good amount of brands as our clients. Probably millions of brands will be using our platform. Today, we have just 1,000 paying clients, but what we are seeing is something that could be really big. Alejandro: In this case, for you guys with Take, Roberto, is there anything that you can share to give an idea of the size of the company – anything that you can share around the number of employees or anything else? Roberto Oliveira: Yes. We have around 500 employees today. More than half of those are on the product team, so we are investing a lot in the evolution of the platform. We have an amazing roadmap, and every day we are receiving other feedback, other assets, so a lot of things to do with the product. We are investing a lot in the service team, too, that can help the brand with best practices and deliver good support and good customer service too. Alejandro: If you had the opportunity, Roberto – let’s say you go into a time machine and that time machine takes you to that moment in time when you were coming out of university, that moment where you had the experience of working with your father, you had the dogmatic approach that they taught you in university, and you were ready to launch your first company. If you had the opportunity to have a chat with that younger Roberto and have the ear of your younger self – we know that, obviously, our younger selves probably wouldn’t listen. But let’s say that younger Roberto was inclined to listen to what you have to say. If you were able to give that younger Roberto one piece of advice before launching a business, what would that be and why based on what you know now? Roberto Oliveira: I think this answer should be different if I’m talking with a Brazilian entrepreneur or if I’m talking with a global entrepreneur. But for a Brazilian, I have a specific case because Brazil is a unique country. It’s not easy to build those kinds of companies here in Brazil. So I always suggest to them to really take care of the cash flow and be able to keep everything organized and don’t forget to take care of the cash flow. Keep all the accounts and be ready to build. In a global perspective, what I like to say is that the most important thing for all the companies, we start having a client because if you have a client, you can implement a strategy doing customer development and implement what I call a short feedback loop process. As we are talking about software companies, as I suggest to all the brands is that they need to look today as digital assets, and they need to have a software mindset and make the evolution using a short feedback loop. I think that today, that is the only way to build a software company is to work in a process of getting a lot of feedback from your users and implement this short feedback loop. At the beginning, we spent more than a year creating the first product. It was successful, but when we launched it, we started to learn lots of other things from the clients, and if we had started to do that earlier, it would have been better. Alejandro: This is super interesting. One of the mistakes that entrepreneurs always make is, for example, the other day, I was speaking with an entrepreneur, and he was showing me this platform that he has spent – I think it was over a million dollars, and he was super excited. I asked him, “How many potential customers have you spoken with to build this?” And he said, “Zero.” I just couldn’t believe it. Right? Because I think that that’s one of the biggest problems that founders make, which is they build based on assumptions rather than based on data. I’m sure that there are a lot of entrepreneurs that are probably listening to us now and listening to what you’re saying around the feedback loop, which I think is critical. If you had to perhaps go a little bit deeper into this and perhaps make it more tangible and visible to them, what does an effective short feedback loop look like? Roberto Oliveira: If you can collect and organize information about the interactions, and the one thing that this new conversational internet has that is really interesting is that for the first time in the internet story, you have a channel where you can use not only software or technology to deliver an answer or interaction with the consumer, but you can use people, human agents because you can use humans to answer some interactions. So what we are doing, usually, we suggest a brand to start as fast as possible publishing as marked content and use people to deliver the first interactions. The other thing that’s really interesting is that it’s a [31:30] conversations. The consumer is saying what they want. So using analytics or technology, you can really understand exactly what the people are saying, so we can have very real feedback about everything that your consumer is telling to your brand, so you can organize and this information you can get a lot of insights and prioritize your roadmap of automations and other new things that you want to launch based on this real data. I don’t know if it’s tangible for you, but I think all this new work and all the companies that have been able to really build very interesting things, they are implementing these processes where they are focusing on understanding how the consumers are interacting with their products and implementing this fast evolution based in launching new things that they understand that could be good because of the insights that they got from analyzing the interactions. Alejandro: That’s very profound, and I’m sure that the people that are listening are going to appreciate that, Roberto. So for the people that are listening, what is the best way for them to reach out and say hi? Roberto Oliveira: Just send me an email: firstname.lastname@example.org. Alejandro: Amazing. Roberto, thank you so much for being on the DealMakers show today. Roberto Oliveira: Thank you, Alejandro. It was a great pleasure for me, and I like your podcast and read all your episodes, so thanks for having me here. * * * If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at email@example.com.
34 minutes | 7 days ago
Daniel Hawkins On Raising $100 Million To Help Remotely Oversee Surgeries
While many entrepreneurs may have found it more challenging to fund their ventures recently, Daniel Hawkins raised not one, but two funding rounds in the middle of the 2020 COVID pandemic, totaling over $100M. His company, Avail Medsystems, has raised over $100 million from top-tier investors like D1 Capital Partners, Sonder Capital, Coatue, and Playground Global. In this episode you will learn: What Avail is doing Why product-to-market fit is so important Learning to invent Daniel’s top advice for other entrepreneurs SUBSCRIBE ON: For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here). Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below. About Daniel Hawkins: Daniel has over twenty-five years experience in executive management, marketing, product management and business development roles in both large and emerging medical device companies including Advanced Cardiovascular Systems, Inc. (ABT), Endologix (ELGX), Restore Medical (MDT) and EnteroMedics (ETRM) and Intuitive Surgical (ISRG). He is a Co-founder of Calibra Medical (JNJ) and Founder/CEO of Shockwave Medical (SWAV) where he led the company from concept to multiple regulatory approvals, built the company to 96 people, initiated commercialization in multiple countries and successfully raised over $100M. Daniel holds an MBA from Stanford, a B.S. in Economics from Wharton and is a named inventor on over 140 patents and applications including the foundational patents for both Calibra Medical and Shockwave Medical. In 2017, Daniel was honored by Goldman Sachs as one of its Top 100 Most Intriguing Entrepreneurs. Connect with Daniel Hawkins: Linkedin Crunchbase * * * FULL TRANSCRIPTION OF THE INTERVIEW: Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. I’m really excited about the guests that we have today. We’re definitely going to be learning a thing or two about medical devices and building and scaling meaningful companies. So without further ado, let’s welcome our guest today. Daniel Hawkins, welcome to the show. Daniel Hawkins: Alejandro, thanks very much for the opportunity. I really appreciate it. I’m happy to be here today. Alejandro: So born and raised in Philadelphia in an entrepreneur house. Tell us about your upbringing. Daniel Hawkins: I’m the son of a primary care physician. The very first house that I lived in, we actually lived on floors two and three of a three-story place, and the first floor was a medical center, was my father’s office. We were in and around healthcare from day one and had an entrepreneurial bent from the earliest of my memories. My first entrepreneurial experience was at age 11. My family had a piece of property that we moved away from the city out into the suburbs. We had a piece of property that had holly trees on it. For those on the East Coast, you’re certainly familiar with these. They show up a lot, particularly in the northeast. They’re that classic green leaf with thorns on it, a tree branch that has the red berries on it. Those are holly trees. I used to have to cut those and trim them. We had really large ones in our back yard. I didn’t like taking them to the woods, so what I asked my dad one time, after visiting the grocery store with my mom and seeing them for sale outside, is if I could actually sell them door to door. So, what I did in my first year of doing that is, I took a piece of paper and drew some columns on it and wrote some addresses and names. I had a small bunch and a large bunch and then a wreath, and I made some samples. I went door to door and took orders right after Thanksgiving, and delivered all of those orders in my mom’s station wagon. I did pretty well that year. I did a little over $1,000. Being north of 40 years ago, that was a big number. That was the itch that started to get scratched. I found myself going to Wharton Undergrad with an eye toward Wall Street. When I was there, my parents had a deal with all of us. I had one brother and two sisters, and the deal was: whatever school you get into, we’ll pay for it, but you need to pay for room, board, and books, which worked out at the end of the day to be about 35-40%. The total and the way I did that was I ran some soda machines in a number of buildings on the university’s campus. So every Tuesday morning, I would meet a Philadelphia Coca-Cola bottling truck and receive what started out at about 70 cases of soda and peaked at about 150 cases of soda. I would load it with a partner, and empty the change, and go to the bank, and deliver a backpack full of change, and move on, and do that again the next week. That paid for a significant portion of my college education. Alejandro: And that ended up being a business that you sold before going into Wall Street. Daniel Hawkins: Yeah. I needed to exit that because I was moving from Philadelphia to New York to get on the buy-side. I got into leveraged buyouts and did that for a number of years. We needed to exit that, and we exited very well and then moved on. I didn’t realize that when I actually did that, that business when I got started in, and I got into it using what amounted to a little leveraged buyout, so I took to that world a bit. Alejandro: That allowed you to see the full cycle of coming up with an idea, making it happen, paying your bills, which at that time is what you needed, and then getting it to the finish line. You started doing Wall Street and what ended up becoming part of JPMorgan today, but at one point, you decided to pack the bags and go to the West Coast and continue your studies. Why did you come to that decision? Daniel Hawkins: It’s interesting, Alejandro. I realized that while I was on the deal side, and there’s a big chunk of that that I loved. I like the pace; I like being able to see lots of different technologies and industries. I realized that what I actually wanted, and after being in a number of board meetings – I was actually a surrogate board member in one of the companies in the portfolio at age 21. I was sitting across from the entrepreneur, and I found myself pining to be on the other side of the table. I realized that I was really more of an operator, and that’s what I really wanted to do. I also still had an affinity for healthcare, so I went to the West Coast to Stanford Business School and immediately came out into the medical device business in 1993. When I see medical devices – just to put it in a frame of mind for everybody, these are angioplasty balloons or stents. You might have heard of those. That’s actually where I started my career as an angioplasty. Or it might be knee implants. That’s the category of medical devices. It’s a couple of billion-dollars industry in the United States and probably 500 billion globally. Alejandro: In this case, let’s talk about the experience at Stanford because the whole ecosystem in Stanford is all about entrepreneurial and building your own business, and that’s like sometimes it’s the final project that you do as part of the graduate degree that you get there. So why did you decide to go into corporate instead of going into startups right away? Daniel Hawkins: It’s a great question. I actually tried really hard to get into startups in business school, Alejandro, and I couldn’t because the area I wanted to do was in medical devices. My classmates, for perspective, if you rewind the tape to 1993, Yahoo was just starting. In fact, a couple of my classmates ended up being there really, really early. One, in particular, I want to say she must have been among the first 20 people at Yahoo. Another classmate of mine was one of the first handful of people PeopleSoft, the company that was then acquired by Oracle. That guy went on to start Workday. It was a very IT-rich environment, and lots of folks were getting into the internet. It was the earliest days of the internet. Had I wanted to go into tech, I think I probably could have ended up in a startup. I wanted to go into med tech. That’s what was interesting for me. One of the challenges with med tech is that startup companies necessarily need to bring in people who are experienced because the nature of the business is pretty specialized. I just couldn’t land a role. So I thought, “Let me go cut my teeth in large caps and go from there.” So that’s what I did. Alejandro: In this case, you did that, and then you went right away into startups. You had the experience with at least eight startups before you went at it. You had that initial expertise before you decided to go at it on your own. But in one of the startups that you were working at, literally, the founder in a weekly meeting talked about a problem, and this was about Intuitive Surgical that was quite an experience for you. Tell us about this. Daniel Hawkins: Yeah. What you’re referring to is an extraordinary experience. I was running a marketing sales department there, and we had these weekly team meetings that were essentially meetings that were intended to bring up issues, and we could break down the barriers of them and, as a group, cross-functional. The CEO was in there, the examiner, Dr. Fred Moll, heads of each of the engineering disciplines, and I was in there. It was called the Critical Path Meeting, and by that, meaning, what’s on the critical path to get us to our goal. We were headed nicely to the complete system of a robot, and this is very complicated. This was the very first robotic surgery technology that was launched. A key component of that is what’s called the Vision System. Think of a camera on a stick, and it needs to be incredibly high resolution. Fred, Dr. Moll, came into that meeting and was visibly sort of off; he was clearly thinking about something. He paused everybody and said, “We have a problem. Our vision system, the camera, is inadequate.” Now, we were using an off-the-shelf camera. We had actually surveyed every camera from any corner of the world built for surgery. What he said was, the best of the best of the best was inadequate. What we were charged with then was: what do we do because that’s a key component of the system? There must have been 60-70 million in the deal at the time. This was back in 1999 when that was an extraordinary amount of money to put into med tech. It was a huge endeavor. So this was one of those moments that was sort of a bet-the-company kind of conversation, and that was: we can’t launch with this camera system. Now, we gnashed that problem for a couple of hours. It was one of the hardest problems to gnash. Then, finally, one of the engineers said, “Wait a minute. We don’t have to worry about how heavy this thing is because the robot is holding it.” The reason that is significant is that every camera on the market is built for a human to hold, and as soon as you could change that core assumption, you could jam all sorts of technology into a camera and make it 8 lbs. if you needed to. The regular cameras might be 1.25 lbs. or 1.75 lbs. because somebody needs to hold it for two or three hours in some cases. You can’t really do that and do it well with something that’s 8, 10, 12 lbs. That breakthrough was a meaningful one. What that showed me, Alejandro is that hard problems are hard for lots of reasons. But very often, one of the reasons they’re hard is the underlying assumptions being made. I took that forward to every hard problem I’ve had to deal with from a technical perspective in every company I’ve been involved with. The way I frame it is, really smart people with a well-characterized problem and consistent set of accurate assumptions usually can find an answer. The time periods when either the problem is not well characterized, or the assumptions that are being made are not accurate is when you run into trouble. That was a watershed of that. We were able to design our own vision system and do so in unbelievably rapid time periods. When it was launched, the vision system is one of the things that got the most attention. That was a really incredible learning experience for me and an amazing thing to be part of. Alejandro: In your case, this was more of what you needed to learn to arm yourself with that knowledge before you would go at it. Your first rodeo was with Calibra. Your first experience was seeing the full cycle with the soda machines. But now, with Calibra, you saw another company that you build, another company that got acquired, and in this case, acquired by Johnson & Johnson in a nine-digit transaction. From this experience with Calibra, tell us in a high-level way, what was the business model and also what was your biggest lesson learned from this experience? Daniel Hawkins: Calibra is an insulin-delivery technology for those folks who have what’s known as Type-2 Diabetes. It’s the version of diabetes that you’re not born with. It’s what’s called acquired over time, and typically, that is for folks that have obesity or some other preexisting conditions. One of the key issues with that patient population is that they need to use insulin or dose insulin more frequently than daily activities will allow them to. So this was one of those instances where a well-characterized problem can lead to creating solutions. The characterization of that problem was a simple one. If you’re a diabetic, and I’m sure some of the folks listening to this podcast either are or have family members who are since 17% of the population has diabetes in the United States. You have to dose insulin with an appropriate frequency to manage your sugar, your glucose levels. If you’re a Type 2, it’s not the kind of thing where if you don’t dose it, you risk some really dangerous, very rapid, onset kind of problems. It’s one of those things where overall, your health is going to deteriorate, you won’t feel as well, and you’ll start to have some complications over time. What that means is, Type 2 diabetics, as a general rule, have a different level of discipline. Situationally if you’re supposed to give yourself insulin 20 minutes before a meal, you might wait until an hour-and-a-half after a meal. Without getting too much into it, from the standpoint of management of the condition, that’s a real problem. Clinically, it’s a real problem. Going back to the lesson learned at Intuitive Surgical, the characterization of that problem was an extremely important one to realize that if you gave somebody a reservoir of insulin, that they could activate through their clothes without using a needle. Then you could increase the frequency of insulin dosage. That was the fundamental premise. It really broke through when we did focus groups of folks with Type 2 diabetes. We learned that there’s a gardener that didn’t dose himself with insulin regularly because his hands were dirty, so he waited – where our device with its regular design would enable him to do that. There was a truck driver that is on long hauls and used to dose only rest stops, hours and hours after he should. There’s a teacher who would dose herself in-between classes because she didn’t want students misinterpreting what a needle was. All of those things led to differences in insulin dosage, so the breakthrough there was recognizing that there’s a very humanistic side to the reasons why there’s a disconnect in when insulin was delivered, and we designed something to solve that problem. The breakthrough, I guess in many respects, for that was the idea. The real watershed was I wasn’t going to let it go, Alejandro. There’s no way I was going to let it go. I knew that this was a great idea. I couldn’t convince the venture capital firms that originally backed our effort to come up with an idea. Then, finally, one of the partners in the venture firm said – my third slide on a 10-slide deck, Alejandro, he said, “Daniel, stop.” I thought, “Oh, boy. We’re done.” He said, “I finally got it. Now, I understand why you’re so passionate about this. We’re going to fund this deal.” I never finished the slide deck. Alejandro: Wow. Daniel Hawkins: He just decided right there and said, “How much do you guys think you need.” I told him, “Ten million dollars.” He said, “Okay. I’m going to take it to the partnership. This is a deal that has to get done.” So the lesson there is: don’t give up. Know what you know. Characterize the problem well; design a product for the problem and design it really well. Be militant about that design and make sure you’re solving a real problem – a pain killer, not a vitamin pill. You’ve got to solve something that’s causing pain. I don’t mean physical pain; I mean some kind of frictional pain that if you can manage to solve that with a well-characterized product, you’ll win. Alejandro: And talking about persistence, that’s something that you also experienced with Shockwave when you actually had to put your last chip in with the college kids’ fund. Tell us about that nerve-wracking moment. Daniel Hawkins: Yeah. That one was edgy. Both Collibra and Shockwave came out of these incubation efforts. They’re a little bit strange. Some venture firms gave me and a couple of partners 2 million dollars. All they wanted out of it was a company. They didn’t tell us what they wanted – what kind of company. They said, “Go figure out an unmet market need in medical devices, and either invent something or in-license something, create a product, and if we like what we see, we’ll give you the money to start the company. That’s how we got Collibra started. Shockwave was the second incubation effort that I did – similar model. In the first one, the engineers that I was partnered with taught me how to invent. I didn’t know; I didn’t have any technical background. We co-invented a couple of things. But I was a bag-carrier for what those guys were doing. I didn’t really know what I was doing. In Shockwave, what they taught me during the Cleaver experience, I started to come up with ideas. I started to mash up technologies. I came up with one that went all the way back to my first medical device company experience in the same clinical area, disease area, and that was in coronary angioplasty. I realized that if I combined some technologies from another disease area with angioplasty, then I could help solve the most complex and hard-to-treat cardiovascular disease there is. It’s called calcified disease. If you’ve ever heard the term hardening of the arteries, that’s what that is. It’s calcium, and it’s as hard as a bone, but it’s embedded in the wall of an artery, and it’s really hard to deal with. What I realized is if I mashed up some technologies, I could probably solve that problem. The trouble is that I came up with the idea right toward the end of 2007, the beginning of 2008, and that was a terrible time to start a company. It was really atrocious. In med tech, nothing was getting funded as early-stage. Alejandro, again, this is one of those things where I knew it was going to work. We had done some quick and dirty benchtop things, and I just knew that this was going to work. I was not willing to let it go. Under no circumstances would I let this thing go. But the venture guys didn’t agree. They didn’t like the idea. They didn’t like any of the other ideas we had. In fact, further to that, at that point, late 2008, they said, “There’s really nothing here – no way to start a company out of any of this, so we’re going to shut down the incubator.” That was my job. That was all I had. I had four kids, and that was an edgy thing for me. I was outside of the Bay Area where most of med tech is, and I realized at that moment, I can’t let this go. So, you’re right. What I did was I negotiated to acquire the intellectual property out of the incubator before we shut it down, and I paid for it using my kids’ college fund. I got another job, and nights and weekends for three years, a couple of folks and I put together some Proof of Concepts and some benchtop experiments, and that name Fred Moll came back again. Fred and I have maintained a long professional and personal friendship. I showed him the technology, and he said, “Daniel, I think you really have something here.” I said, “Fred, I know. I’ve been working on this. I haven’t told you about it, but I’ve been working on it for quite a while.” Fred led what became a 4-million-dollar Series A, and in the beginning of 2012, I went on full-time as CEO of Shockwave. That experience continued until I left that company to then start Avail, my current company, but before doing that, I turned the reins over to a guy called Doug Godshall, who is the current CEO for what is now a public company under Ticker: SWAV. It went public in March of 2019. That was definitely a full-circle one, but a very, very high-stress kind of early environment to get that thing kicked off. Alejandro: So, Shockwave was an incredible journey. Right now, we’re talking about a company that the market cap is over 3 billion, so it’s incredible that such a persistence and not accepting a no for an answer really brought this incredible concept to life. From this journey, what would you say was your biggest takeaway? Daniel Hawkins: I think jockeying for the biggest takeaway is going to be persistence. And frankly, I’m going to go right back to that Tuesday morning meeting when we discussed the scope all the way out to Intuitive Surgical. It’s the notion that smart people with a well-characterized problem can come up with a creative solution. We had to deal with a number of those at Shockwave, not the least of which is our technology required putting 70 atmospheres of pressure into an angioplasty balloon that was designed to burst at 12. What we had to do to be able to do that is realize how to mash up a couple of technologies properly and take a page out of physics. We went to core physics capabilities and relied on them and tuned the technology to be able to work off of core Physics principles, and it’s singularly because the problem was incredibly well characterized and the right people were around the table, and we were persistent. Alejandro: In your situation, you gave the reins of the company to someone to take it public and become the CEO. Then, you used that time to spend more time with the family, and then also to incubate what would become your next baby, Avail Medsystems. Tell us about this one. Daniel Hawkins: It’s exactly right. When I left Shockwave, it was because, in 2016, I traveled a quarter-million miles for the company. When my last investors were pre-public investors like T. Rowe Price and Fidelity, it became very clear that we were headed public. I did, in fact, make the family-related choice to step back a bit there – that was the first half of 2017. The second half of 2017 pulled the covers back on an idea that had been cooking a little bit. That was to create a technology that enabled what is known as clinical specialists, and then, of course, salespeople who (most people aren’t aware) spend a good 75-80% of their time in procedure rooms or being involved in procedures selling the technologies that surgeons use in the surgery rooms themselves, in the operating rooms. It’s really a technical selling type of rule supporting the surgeons through what they’re doing. The problem with that is, the requirement to physically be in the room was limiting. If you’ve got 15 customers, you can only be in one room at a time. If you’ve got to go from one room to another room across town, you waste an hour or two or three. As it turns out, those people waste 60% of their time in logistics going from one location to the next. As somebody was coming off of operating a medical company with sales teams out there and knowing the industry as well as I did, that was an untenable problem that with today’s technologies really could be soft. We launched Avail, and I got some of the same cast of characters from Shockwave’s early days of investing, including Fred Moll, to back the company in the early formation days, and then went on in early 2018 to raise a 10-million-dollar Series A. I tacked on 15 million of the Series A1 at the beginning of ’20. About seven months later, closed on a round for 100 million dollars to scale the company. The intent here and the gutsy part of this is we’re building a network of hardware that goes into operating rooms, and we’re not charging the hospitals for it at all. What we’re doing is charging a remote person a time-based fee to access the operating room, obviously with permission of the hospital and the physician. What we’re recognizing is a terrific amount of traction. We’re seeing an ability to disseminate medical technologies and medical techniques considerably faster than they can if you have to be there physically in a room to do it, which has been the norm for 40 years. Alejandro: One thing is for sure, Daniel, is that being at the right time in history is everything when it comes to building and scaling companies. Before, we never saw nurses and doctors on front pages of magazines and newspapers, and now, especially with COVID, that’s the norm, that’s the day-to-day. Obviously, you’ve been at it for a while in the medical devices space. Would you say that maybe everything that has happened with COVID has pushed the wind behind all of the healthcare sector and perhaps even medical devices? Daniel Hawkins: Yeah. I would say that’s right in many respects. One of the things: I’m going to tip a hat to those who deliver care every day. There’s an extraordinary amount of work, effort, and expertise leveraging to be able to treat patients in normal times – unsung heroes in the nursing and physician community. That was a daily occurrence for my career for all of it pre-COVID. Right now, I’ll broadly state that, of course, healthcare is having a moment in and around the pandemic. From an Avail perspective, what we have created certainly gets the benefit of a lot of tailwinds due to COVID, but the fundamental issue, the problem we’re solving, is a pain point. I alluded to earlier that you try to solve pain points, come up with pain killers, not vitamin pills. It’s a pain point because 50-60% of the medical industry’s field teams’ time is wasted in logistics. That means that they also can’t get to places where they’re needed, and clinical care can actually be impacted by that. We’ve created a technology that allows them to support all of their customers and for the best technical expertise to be brought to bear in every procedure across the country and ultimately around the world. I would say that overall, healthcare has some tailwinds right now that are meaningful. New medical technologies are definitely having a bit of a moment. Having said all of that, it’s got to be stated, although blindingly obvious, that as much as the tailwinds have provided in terms of lift for Avail, I would trade slower growth for no pandemic. Alejandro: In this case, Daniel, it’s been a tremendous journey as an entrepreneur – a tremendous journey as being part of the world of startups and a journey full of lessons learned, full of the good, the bad, and the ugly, which, obviously, the journey is not a straight line. So if you had that opportunity of going into the time machine and being able to sit down with your younger self, that younger Daniel that was coming out of Stanford and thinking about a career shift and going at it and entering the startup world, what would be that one piece of business advice that you would give to yourself, given what you know now, before launching a business and why? Daniel Hawkins: One piece of advice. It’s not something that I can put into a strip that goes inside of a fortune cookie, but what I will say is if you’re going to start a business, pay attention to the problem you’re solving. Understand it at its fundamentals. Most importantly, try to deconstruct why it’s a problem. If you deconstruct why it’s a problem, and you’ve got yourself and other smart people around it, you’ll come up with a solution that is groundbreaking. It doesn’t necessarily have to be a technology; it can be a service. But if you deconstruct a problem properly and create what I like to call product-to-market fit, what you’ll find out, be it a service or a technology or some other type of product, if you have the right product-to-market fit, so many things happen differently than when you don’t. I guess that would be the #1 lesson is it all starts at the product. Alejandro: Very profound. Daniel, for the folks that are listening, what is the best way for them to reach out and say hi? Daniel Hawkins: You can certainly hit me up on LinkedIn. That would be a great way to do it if your interest is to learn a little bit more about Avail. You can certainly do that via our website in the info@ – you can learn about Avail that way. If you’ve got interest in connecting directly, feel free to send me a note on LinkedIn, and we’ll see if we can connect there. Alejandro: Amazing. Well, Daniel, thank you so much for being on the DealMakers show today. Daniel Hawkins: Absolutely. Thanks very much for the opportunity, Alejandro. I’ve enjoyed it and appreciate the opportunity. If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at firstname.lastname@example.org.
43 minutes | 10 days ago
Cherif Habib On Starting His First Company At 16 And Raising $100 Million To Remove Barriers To High Quality Healthcare
Cherif Habib has been a lifelong entrepreneur. He started his first business at just 16, has taken startups full cycle, and has now raised $100M for his latest healthcare venture. His company, Dialogue, has just raised $100M from top-tier investors like HV Capital, White Star Capital, Walter Capital partners, and Sun Life Financial. In this episode, you will learn: How Dialogue got started The challenges of fundraising, and mindset you need Raising money in Montreal versus the US Cherif’s top advice for other founders SUBSCRIBE ON: For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here). Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below. About Cherif Habib: Cherif Habib is the Co-Founder and Chief Executive Officer (CEO) of Dialogue, Canada’s leading virtual care company. Launched in 2016 and having raised over $100M in venture funding, Dialogue offers its service to millions of individuals, and provides care to more patients every day than the largest emergency rooms in the country. Dialogue has received several industry accolades, including Deloitte’s Top 50 Companies-to-Watch award. Before launching Dialogue, Cherif Habib was the CEO of EMcision, a medical device company sold to Boston Scientific, and spent three years at McKinsey as a senior management consultant. Cherif Habib has an undergrad in Computer Science, a Master of Law and an MBA from Wharton with majors in Marketing and Operations. Connect with Cherif Habib: Crunchbase LinkedIn Twitter * * * FULL TRANSCRIPTION OF THE INTERVIEW: * * * Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a founder that is executing, building, scaling, you name it, out of Canada, out of Montreal, and definitely doing great, great stuff. I think that we’re going to learn quite a bit, and I don’t want to make you wait any longer, so without further ado, Cherif Habib, welcome to the show. Cherif Habib: Thank you, Alejandro. Thanks for having me. Alejandro: Originally born in Cairo, and you spent some time there until your parents moved to Montreal when you were ten years old. How was life growing up for you? Cherif Habib: Life was great. My parents had a great life in Egypt. They moved to Canada because they wanted to give me and my sister better life opportunities. Sometimes, people talk about winning the lottery by being born in a certain country. People often say, “I won the lottery because I was born in the U.S. or born in Canada.” What my parents basically did is that they changed the odds in our favor by moving to Canada, and I really appreciate that. I think that’s why it’s so powerful with immigration. They left behind a very comfortable life to go to something new for us. That was great. Alejandro: Also, for you, you were already ten years old, you so were quite aware. You already friends that you had made, and it was quite a change for you, so how do you think that has shaped you and especially your personality? And even bigger than that, how do you deal with uncertainty because I’m sure that has taught you quite a bit now that you’re an entrepreneur? Cherif Habib: Absolutely. Moving away from Egypt was, obviously, very hard on my parents. I think it was much harder for them than it was for my sister and me because, as kids, you adapt in an easier way. But it shaped me because I’m a very adaptable guy. I get along with people very easily. We’ll talk about this later, but I’ve moved several times since then, as an adult, to different places. I think I did a good job both keeping in touch with my old friends and also making new friends in new places. My first friend that I met on the first day of school at four years old is still someone that is very close to me today, and we’ve kept in touch throughout all these years. I’ve, obviously, made many new friends since then, and I would say that this is one of my strengths. Alejandro: Also, for you, you had your grandparents, also entrepreneurs, so I’m sure you learned quite a bit from them and saw them operating their own business. What lessons did you take out of that? Cherif Habib: Absolutely. My four grandparents were entrepreneurs, as you mentioned. On my dad’s side, my grandfather was a civil engineer and a real estate developer. My grandmother had a furniture or woodworking factory. They made furniture, but she also supplied many things for my grandfather’s building, so they were clients or suppliers of each other, which was interesting. And on my mother’s side, it is a bit of a similar story, where my grandfather was a grower. He had a farm, and he was growing flowers, fruits, and vegetables. My grandmother had a very successful flower business. So, again, kind of a vertically-integrated business. Growing up, my four grandparents always talked about work at the dinner table, and I grew up with that jargon. What’s really interesting is that all of them were very successful business owners without going to business school without access to venture capital or even traditional sources of financing like bank debt. All of that, 50 to 60 years ago, didn’t exist in Egypt. They all succeeded with a mix of extremely hard work, good judgment, and integrity, doing the right thing for their employees and for their customers. When you think about it, that’s really, basically, all you need to know to succeed in business. The rest is kind of micro-adjustment and optimization, but this is really the foundation of it all. I consider myself extremely lucky to have grown up in that environment with those role models. It was an amazing experience. Alejandro: Talking about not having the education or just having the drive itself. Look at you – at 16 years old with your first business. Tell us about this. Cherif Habib: Yeah. I was an accidental entrepreneur. At 16, I started a business with a very close friend of mine in high school. Essentially, for us, it was a very simple means of gaining financial independence from our parents. It was a very – this is how we got away from having to depend on an allowance from our parents to get nice things and go out. We were both tech nerds, and we started a small IT consultant business configuring networks and solving printers at a dentist’s office, making websites, stuff like that. We were earning way more money than anybody at our age, and we had an amazing time. That was another great formative experience. That’s when I decided that I wanted to be an entrepreneur for the rest of my career. Growing up, the dream was to become a doctor. At 15 or 16, when we started that business, I got hooked. From then on, I had no doubt how I was going to spend the rest of my career. Alejandro: That’s amazing. In this case, you had that love for computers, and you ended up studying computer science. Do you remember how you started to develop this love for computers? Cherif Habib: Yes. My dad was one of the first people in Egypt to own a personal computer before they were available for military or commercial uses, and very early-on he believed in it, and we had a computer at a very early age. He really cared about me learning to type and learning to use the computer, and I was hooked from a very young age. Alejandro: So, then, let me ask you this, because you go to school and study computer science, and you kept at it by being an entrepreneur there. It was your second business, and this one, you would be juggling with college, but then also having crazy amounts of cash around you. So, tell us about this telecom business. Cherif Habib: Yeah, that was a really interesting story. If you remember, back then, we’re talking about the year 2001. Today, everybody has an iPhone or an Android device. Back then, there were hundreds of different handsets that you could have. A friend of mine and I had seen a cool Ericsson phone. I remember it was a T28. That Ericsson phone was available in Europe, Singapore, etc. We had a friend who was going to Dubai over the holidays. We asked him to get us two of these phones. He got back, we had the phones, and we were the coolest kids in college. We then realized that they were sold on eBay for much more than we had bought them. So, it was a silly kind of business that started from there. We started importing phones from Asia, the Middle East, and Europe and selling them on eBay. Then, we started a wholesale business where we started selling them to cellphone stores across Canada. Then, we started selling them through network operators. So the business really grew very fast. We started from nothing. Again, no cash; no financing, and we grew it into a pretty big operation. Now, don’t forget that we’re full-time computer science students. We were three partners at the time, and we would put all of our classes in one day and run the business for the six other days of the week. It was really fun. We were working nonstop. Again, it was a really fantastic experience because we learned a lot from it. I remember one strange situation where we found a supplier for a model of Nokia phones in the States, and we found a buyer in Singapore for thousands of these phones. Each of these phones cost a few hundred bucks. This was a transaction for several hundred thousand. Of course, we didn’t have that money, so we flew down to the U.S. to that supplier, and we made sure that they had the stock. Then, we got the client in Singapore to wire the money, and we stayed there overnight. Of course, the guys in the U.S., when they took our passports to check our identity, they couldn’t believe that we were 19 years old doing transactions of that size. That big trade put us on the map, and we started trading pretty big quantities of handsets. Over time, we got into the accessories business, which actually turned out to be a better business than handsets. The accessories business had much bigger margins, and it was a very, very fragmented supply chain, so we were able to make a dent. I did this business for about five years with two of my partners, and after five years, they bought me out, so I sold my shares to my two partners because I wanted to go and do something else. That’s when I moved to Switzerland, and I joined McKinsey in their Geneva office. Alejandro: Being an entrepreneur, being able to build your own dream, why did you decide to go and build the dream of someone else? Cherif Habib: It’s a great question, and it’s because I wanted to do something even bigger. Back in the day, I had never heard of McKinsey, actually. I read in the newspaper – there was an article that was doing an analysis of the background of entrepreneurs. It said that many of them had gone to great schools, Ivy League Schools, and it showed the backgrounds of many successful entrepreneurs. I remember the article basically said, the number one place these people come from is McKinsey, #2 is Goldman Sachs, #3 is Bain, Morgan Stanley, etc. I had never heard of any of these things. I said, “I’m going to apply to each of these in order. I’m going to apply to McKinsey first, and if I don’t get it, I’ll apply to Goldman, and so on, and so forth.” I said, “Before I apply to McKinsey, let me send some questions to one of their offices so I can get my answers, and then when I understand what this is all about, I’ll apply to McKinsey in Montreal.” I picked Switzerland randomly, and I started emailing them all sorts of silly questions. After a while, they said, “You’re asking a lot of questions, so why don’t you, next Monday at 9:00 am, speak to the senior partner, and he’ll answer all your questions.” I said, “Great.” We had this conversation, and after the phone call, I got an email from their recruiters who said, “Congratulations. You passed the first phone interview. We’d like to invite you to a full day of interviews.” I took a plane, and I went to Zurich, and I did the typical eight interviews in one day. What’s really interesting with that is because I didn’t really know how big of a deal this was, and because I didn’t torture myself with the preparation – I bought a book that says how to prepare for a consulting interview. I read it on the plane and train ride. I think because I didn’t know, I was not intimidated because I had no idea what this whole McKinsey thing was about. That was another lucky break in my career. Alejandro: It’s interesting how all these people that end up going to McKinsey or Bain or consulting-type of operations, they end up being very good at dissecting a problem and coming up with a solution. Like dissecting a big problem into multiple small problems and then tackling each one of those. So, what did you get from that? Cherif Habib: Yeah. That is one of the very nice skills that we got is breaking something complicated down to more simple things. But I think, really, what I got the most out of that experience is the confidence in myself that I can learn a new industry or a new problem with a beginner’s mindset. And just by asking basic questions, understand the big forces in that industry. I remember, at some point, I was staffed on a project in Egypt, and it was for the Ministry of Transport, and it was for a huge project. Every weekend, I would go have dinner at my grandparents. My grandmother asked me a question. You know, grandmothers sometimes get to the core of something very fast. She said, “What the **** do you know about transportation, and how is a 24-year-old advising the Minister of Transport on a strategy? What do you know about it?” That was an amazing question because she was absolutely right. We were a bunch of kids advising the minister of transport on a strategy. Essentially, that experience taught me that I could learn any industry and any situation and understand the basic things, but it also made me realize that I actually didn’t know anything, and her question was totally fair: who am I to advise on strategy? So that was a nice dose of humility. Alejandro: I hear you. Then, you go to Wharton, and Wharton is an amazing community that amazing entrepreneurs have come out of. This was a really nice segue to perhaps reshift or redirect your career, and I think this got you into the world of building and scaling and hypergrowth. And eventually, you end up in your uncle’s company. How did this happen? Tell us about it. Cherif Habib: Maybe just a quick word on McKinsey and Wharton because I think it was a really important lesson for me. In that stage of my life, in my early 20s and my mid-20s, because I didn’t go to any fancy college or any of that, I was still in the mindset of attaching myself to “prestigious” brands. I was still in that mindset of having a chip on my shoulder and showing the world that I could do it – that I could work for McKinsey, that I could go to a top-rated Ivy League school despite my background and total lack of connections, etc. There was, unfortunately, this insecurity of attaching myself to a brand. Having said that, it was an amazing experience, and I’m really glad I did it. At Wharton – at that point, Wharton was shifting from being known exclusively as a finance school to being one of the good places where entrepreneurs come out. I went there as that shift was happening, and many amazing entrepreneurs came out of the school later on, which was great. In the few months between McKinsey and Wharton, I was unemployed, and I was helping my uncle, who is a world-renowned liver surgeon. He had a small company called EMcision. That company had a few patents coming out of his experience operating in liver surgery. I spent some time trying to organize the strategy thinking about how we make products out of his patents, what did the solutions look like, etc. During business school days, I stayed in touch with him and helping him informally. When I graduated, I decided to join forces with him full-time. I started as the COO of the company dealing with everything that was not medical or scientific. After about a year, the board and he made me CEO, and he was CMO, Chief Medical Officer. We had a really good partnership because we really trusted each other. He’s my uncle, and we have a really, really good relationship. We were very complementary. The division of labor was really clear. He was going to take care of the medicine and science, and I was going to take care of everything else, or “the business” side of it. That was a really successful partnership. I learned a lot from that. That’s what got me hooked to the business of healthcare. I got passionate about healthcare during my time at EMcision. I knew that I was going to spend most of if not all of my career in healthcare because I really loved it. Alejandro: So, how was this journey with EMcision? Cherif Habib: It was fantastic. We had very little means. We had only raised a little bit of money from friends and family and angels. No institutional investors. We had to deal with a lot of constraints. As you probably know, building a medical device company is a very capital-intensive journey, and we didn’t have capital. So, we did a lot with very little. We put out the products. We passed through the regulatory hurdles, whether it’s the FDA or Health Canada or in Europe. We sold our devices all over the world. The U.S., Germany, and China were our largest markets. We made a real dent. These were surgical devices that helped in the treatment of liver cancer and pancreatic cancer and cancer of the bile duct. We really made a dent by having a huge impact on these patients, increasing their lifespan and improving their quality of life. It was a very, very impactful and motivating business. But it was hard because we were competing with a company where the CEO’s salary was higher than our whole annual revenue of the whole company. In the medical device world, it takes a lot of money. It takes, usually, tens of millions to get to market and to be commercially viable, and we did it with an order of magnitude less. When the opportunity came to exit to Boston Scientific, we knew that was the right exit for us because it would allow us to take our products and multiply by 100 the salesforce and the commercial efforts, and therefore, get so many more patients to benefit from it. So we came to a deal with Boston Scientific. That was a really good outcome for us, personally, a really great outcome for all of the investors and shareholders. But, most importantly, it was a great outcome for the patients that needed this product because so many more now could benefit from it. Alejandro: Obviously, this allowed you to see the full cycle of a business. Right? Cherif Habib: Exactly. Alejandro: All the way until the finish line, and I’m sure that gave you a lot of visibility and perspective, too. If you had to take one lesson from this experience, what would you say that was? Cherif Habib: We had some really tough times building EMcision. We ran out of money several times. I remember, sometimes, passing the payroll on my personal credit card. So, these were really tough times. But I feel like when you’re working on something so impactful, it really makes those tough times much easier because now, you’re working for a cause, and you’re not just running a business. I think that if we weren’t in that field or doing something with such an important mission and knowing the patients that we were helping, it would have made it almost unbearable psychologically to go through the tough times. Alejandro: Let’s shift gears here because, after EMcision, you started your baby, Dialogue. Let’s talk about Dialogue. How do you come up with this problem, and how did you go about addressing it with a solution that has become Dialogue today? Cherif Habib: Yeah. There was actually a bit of an overlap between the two because the deal with Boston Scientific, at the beginning, fell through because of a regulatory issue, and it took us 15 or 16 months to fix it and consummate the deal. So there was a little bit of an overlap between the two businesses, but essentially, with EMcision, with my medical device company, I was traveling all over the world to sell our devices. I got an amazing education of how healthcare is delivered and structured and how the systems work in different countries. I was really inspired by the healthcare systems of Scandinavian countries in Switzerland, and I felt like we could take a lot of these best practices and bring them back to Canada. At the same time, I met the folks out of an incubator here in Montreal called Diagram. Diagram, at the time, was more of a fintech incubator, and they wanted to start a vertically integrated health insurance company, kind of like what Oscar was. I decided to join forces with an early team and to start that business. Very quickly, we realized just the telemedicine portion of that was really interesting. In the first few weeks or maybe months of running this, we thought that we would build a B2C company. The vision was anyone on their phone could see a doctor and not have to wait days or weeks to get an appointment with their primary care provider. Now, maybe just open a small parenthesis. People in the U.S. sometimes feel that the Canadian healthcare system is the nirvana, and if you listen to Bernie Sanders or others, they talk about the Canadian healthcare system as if it was the best thing in the world. Living here, we recognize there are a lot of great things about our system, but was also recognize that there are many shortcomings. Actually, many people think that the U.S. healthcare system is better. The reality is somewhere in-between. I think if you pick and choose some elements of both, you get to the right system. All this is to say that we started working on this idea of allowing you to see a doctor faster on your smartphone at any time. Within the first months are so, we quickly pivoted to a B2B play, which is what we’re operating now. So we basically figured out that Canadian employers, even if the healthcare system here is universal and free, Canadian employers were, in fact, paying a lot of money indirectly because their employees were missing work, and their employees were not as productive as they can be because it takes weeks to deal with an issue. So, we decided to build a B2B-focused telemedicine company, and we would sell subscriptions to businesses where they would pay us a small amount for employee-per-month to give all of their employees access to our service. This is the first couple of years of the business, this is how it was, and that value proposition resonated really well in the market, and we grew it into what become a very sizable business. In the last couple of years, essentially, what we realized is that employers deal with many suppliers in the health and wellness space, and there’s a fatigue with dealing with all these different point solutions, and that nobody had really succeeded in creating an integrated platform for these health and wellness services. So, Dialogue has evolved, in the beginning – we started with this idea of building a vertically integrated health insurance company, and then we decided to focus on telemedicine. We thought it was going to be B2C. Rapidly, we pivoted into B2B. We saw a lot of traction there. That was clearly the product/market fit. We see ourselves not just as a pure-play telemedicine company, but as an integrated health platform that included telemedicine for primary care, but also for mental health, for employee assisted programs. And we’re going to continue building spokes in the hub. It’s really interesting how the idea has evolved over time with market feedback. Alejandro: For the folks that are listening, what ended up being the business model? How do you guys make money in Dialogue? Cherif Habib: We make money by charging businesses a monthly recurring fee. It’s a per employee per month fee. And depending on how many services you sign up for, it could be $6, $7, $8 per employee per month if you’re a primary care-only client. It could double if you subscribe to our other services. Today, we have about 25,000 different businesses that are clients of ours. A thousand of them, we acquired directly, and the rest, 24,000, we acquired by working with distribution partners such as insurance carriers, benefits consultants, etc. Alejandro: Cherif, what I want to ask you, too, is, for a business like this, obviously, it requires capital. So how much capital have you guys raised to date? Cherif Habib: We have raised just over 100 million dollars. Alejandro: Got it. The tech scene, the hypergrowth company scene is booming in Montreal. What do you think has triggered that? Cherif Habib: Montreal is an incredible place to start a tech company. We have one of the highest concentrations of universities and students per capita in the world. We have many great technical universities here. The cost of living is quite cheap. Our quality of life is amazing, and the government has put in place several incentives for R&D and technical work. So all of these reasons together have created a very vibrant scene, and I would say that in the last ten years, this scene has exploded. I graduated from Wharton in 2011. Going into Wharton, I thought that I would move to Silicon Valley afterward. That was kind of my dream. I saw what was going on back home and how the tech scene was starting here in Montreal. I decided to come back home – some, for personal reasons being with friends and family, but some because I saw this emergence of a scene. I think that Montreal is probably one of the best places in the world to build a tech company. Alejandro: Let me ask you this because I know that going back to what you were saying on the fundraising. For you guys, it has not been a thing of roses and beautiful. Obviously, at some points, it has been cloudy, specifically on your Series B. What happened? Cherif Habib: I don’t know the exact percentage, but I think that the vast majority of venture capital in the world is concentrated in the U.S. We had a very hard time raising from American investors because invariably, the feedback we received was, “Your growth is unbelievable. Your metrics are fantastic. You really topped this. We rarely see those numbers. But we just don’t understand the Canadian healthcare system enough to make an investment there. It was always kind of a different version of “This is outside of our circle of competence, or we don’t understand this well enough. So when you exclude the biggest source of capital in the world from your fundraising process, it, of course, makes it much more difficult. There are now many great investors in Canada, and it’s easier to raise money here, but it’s still a much more limited environment than in the U.S. or even Europe. So our universe of potential investors was limited, and our Series B took a little bit longer than we would have liked it to take. We were getting dangerously close or closer than I would like from running out of money, so it was a pretty stressful time. But the nice thing is that we ended up raising money from the investor that we had put as our number one. It was our dream investor for his business at CDPQ. It’s the pension fund of our province. We wanted to partner with them because they have a very long-term orientation. This is really patient capital. Because we were building something in the healthcare field, we felt that having an investor that also had this pension fund, or public orientation would help us. Again, it was difficult, but at the end, we ended up closing with our number one favorite investor. So it worked out really well, but I would tell you that for a few weeks, I was sweating really hard. [Laughter] Alejandro: I’m sure that there are a lot of people right now that are listening, that are also maybe sweating really hard right now because, obviously, COVID has really complicated a lot: the opportunity to interface with investors, the opportunity – people literally have to work harder, even though, if you take a look at data, it seems that it has been booming – the total number of financings. But when you’re at that point, and you’re sweating hard, as you said, and you’re starting to hear those voices of what-if, what-if that, what kind of piece of advice would you have for the folks that are listening? How can they go about quieting those voices? Cherif Habib: Alejandro, that’s a really, really good question. I think the founder or the CEO psychology is so important, and I think that I’m probably not the only one who hasn’t taken care of it over time. I think we work so hard, and we’re so into the action that we don’t take care of our own psychology, and I would say that this is really important. Then when you look at so many now iconic and successful companies and you read their origin stories, you’ll see how much they struggle to raise money. Look at Peloton. Peloton is now a breakout success. You read about their first couple of years, and they couldn’t raise money from anybody. Everybody thought, “The hardware is impossible. The margins were not good enough. There’s no mold, etc.” You read about companies like Cisco, how many noes they got before they got a yes, and it was one of the best investments ever. You realize that you just have to set yourself up that you’re not going to get a yes in the first 10, 20, 30 meetings, and that you may have to do 100 meetings to get a term sheet. If you go in with that mindset, and if you end up performing better, hey, fantastic! But, at least, you’re going in with that expectation that it’s going to be hard, that it’s going to be long, and you’re going to get a lot of noes. The other thing that I would mention is that during this time, when I was raising the Series B, I was going to the gym every morning, and I was listening to an audiobook. It was the Nike founder’s book, Shoe Dog. I was listening to it in the morning. Nike is, obviously, in a very different industry, a very different time. There was no venture capital involved, but Nike, in their first 10 or 15 years, was so close to the brink of disaster or bankruptcy or worse. It makes you realize that even if I was in a different era raising money for a health tech company, that the experience was actually very similar. I think that every entrepreneur, every business goes through these difficult valleys, and you just have to keep the faith; you have to believe in yourself and your team. If you have something good, then eventually it works out. Alejandro: Absolutely. Cherif, for the folks that are listening to get an understanding of the size of Dialogue today, anything that you can share on numbers of employees or anything? Cherif Habib: Yes. We employ about 800 people. Six hundred of them are healthcare providers, and 200 of them are in our other functions. I remember when I started the company, one of our investors said that the best companies in the world triple, double-double, or the other way around. I don’t remember. I remember saying, “This guy’s nuts.” Essentially, we ended up doing better than that, which looking back at it, it’s hard to believe, but it’s really amazing. Alejandro: One of the questions that I typically ask guests that come on the show, and I think it will be very appropriate here to ask you, is if you had the opportunity to go back in time and go back to that point, perhaps even before starting Dialogue, maybe your younger self in 2016, and you were able to give yourself one piece of business advice before launching a business, what would that be and why knowing what you know now? Cherif Habib: I would say, probably that one piece of advice is to trust my instincts more. Almost every single time where I made a decision that didn’t listen to that inner voice or that gut feeling, over time, it ended up being the wrong one. Even if I made the decision with what I thought was the right data or trying to be logical about it, or trying to apply things I learned in business school, at the end of the day, I learned that my instincts and my gut are often right, and if I don’t listen to that little voice, and I make decisions based on other things, I often regret it. So, I would say, listen to my instincts more. Alejandro: Very profound, Cherif. For the folks that are listening, what is the best way for them to reach out and say hi? Cherif Habib: I am on Twitter. I don’t have many followers, but I’m getting used to the medium. I really enjoy it. So, I am @cherif or you can email me email@example.com – I always love hearing from folks. Alejandro: Amazing, Cherif. Thank you so much for being on the DealMakers show today. Cherif Habib: Thanks for having me, Alejandro. Have a great day. If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at firstname.lastname@example.org.
44 minutes | 17 days ago
Gautam Tambay On Raising $53 Million To Help You Learn Online With A Job Guarantee
Gautam Tambay is the Co-Founder & CEO at Springboard, a company that has been successful in breaking the 500-year-old education system with a new way to empower workers for the new economy. Their mission is to help a million people to find a more efficient and relevant way to learn and gain modern employment in the new world of work. The company has raised $53M from top-tier investors like Learn Capital, Costanoa Ventures, Telstra Ventures, and Blue Fog Capital. In this episode you will learn: The surprising advantages of being totally transparent with your team Hiring on values and building your startup culture The evolving fundraising process When you should turn down investors His top advice for other aspiring entrepreneurs SUBSCRIBE ON: For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here). Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below. About Gautam Tambay Gautam is CEO & co-founder of Springboard, a rapidly-growing workforce development company focused on digital economy skills like AI & Machine Learning, Data Science, CyberSecurity, and UX Design. Springboard has trained over 200K professionals, helping digital economy aspirants get job-ready with 1:1 mentorship from industry experts. The company also collaborates with Fortune 500 companies and startups as a training and talent partner. Gautam spent the first decade of his career working on technology, data, and strategy at InMobi, Bain & Company, and Capital One. He holds an MBA from the Wharton School, and studied engineering at IIT Delhi. Connect with Gautam Tambay LinkedIn Crunchbase Twitter * * * FULL TRANSCRIPTION OF THE INTERVIEW: Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we’re really going to enjoy the guest that we have joining us on the show. We’re going to be learning about culture; we’re going to be learning about how the culture may or may not be impacted when you have different offices, and then also building and scaling. So without further ado, Gautam Tambay, welcome to the show today. Gautam Tambay: Alejandro, thank you for having me. I’m so excited. Alejandro: So originally born in India. You jumped from place to place quite a bit because your father was in the army, but tell us about your life growing up there. Gautam Tambay: Yeah, thanks for asking. My dad was in the army like you said. That meant that we moved to a new city every three years. At the time, I didn’t realize how much of a boom that was going to be for me over the course of my career. What it gave me is the ability to be dropped into any new context and quickly understand what’s going on, quickly make new friends, and really adapt. That served me really well. I wouldn’t trade that upbringing for anything else. Alejandro: Entrepreneurship and being an entrepreneur, there’s a lot there of dealing with uncertainty, but since you were moving quite a bit, and you had to make new friends every three years, I’m sure that shaped you up a little bit for being able to deal with uncertainty and uncertain moments. Gautam Tambay: For sure. I think both uncertainly and change, which are so core to being an entrepreneur and so much about the journey. I learned to deal with those very early. The funny thing is, I don’t think I realized that I was learning that skill because when we were growing up, that was just life – every three years, you moved. There was no alternative. When you’re six years old, that’s the only life you’ve known. Only in hindsight have I been able to connect the dots and say, “That was actually something that gave me these life skills that let me adapt to new circumstances, make connections more easily, which is very valuable, and fundraising, and when hiring, and get to understand different kinds of people and understand different perspectives because we moved to different parts of the country. Culturally, India is one country, but it’s like Europe in that the north is as different from the south as Norway is from Italy. So, that helped me be able to understand different people’s contexts and motivations more easily and faster. Alejandro: It’s interesting, too, because then you went and studied mechanical engineering. But one of the things I want to ask you is that most of the entrepreneurs that are from India originally, they all have the engineering background. Why is this? It’s unbelievable. Gautam Tambay: You know, that’s funny you ask that. This has changed, but when I was growing up, if you were good at school, then there were two things you could do. You could either become an engineer, or you could become a doctor. If you wanted to do the crazy, risky things, you became a lawyer. That’s just the India I grew up in. It’s changed quite a bit since. Even my sister, who is seven years younger and a designer, and that’s not a profession that was even in the realm of possibility that was offered to me. So I think exposure really matters, and I think that’s all we were exposed to. It’s almost a given that if you’re academically doing well, then you end up in engineering or in medical school. Alejandro: Let’s talk about you ending up in D.C. How do you land in D.C. all the way from India? Gautam Tambay: Yeah, that’s a great question. One of the great things about engineering school was, I think a couple of years into it, I realized two things: 1) I didn’t actually want to be a mechanical engineer. I wasn’t very good at it, but I really liked the way of thinking that engineering taught me, like a structured way to bring down any problem. That’s what I got attracted to. Over time, I ended up doing more applied math kind of work in my engineering program. There’s a company called Capital One based in D.C, which, at the time, would hire a couple of people every year from the engineering school that I went to in Delhi, and they would bring them to Washington, D.C. to work on what I think of as applied math problems, which, at the time, was data analytics and data science. I got recruited into one of those roles on campus, which ended up then changing the trajectory of my career in terms of being exposed to the U.S. and learning a lot. Alejandro: So, how was that experience of coming here? Was it like a culture shock? Gautam Tambay: Yeah. It certainly was. I had spent some time before and had done a couple of internships, one in France and one in Norway. Those had been my first exposures to living outside of India. I think coming to D.C. was definitely a culture shock. I remember; I think it was my first week in D.C. walking into a bookstore, Barnes & Noble, in 2003. I think President Bush was in the White House. I remember walking into a store, and the first thing I saw was – you know that table where there are a lot of display books. There were three or four books that were jokes about George W. Bush. I’m like less than a mile from the White House, and that was mind-blowing for me to say, “Wow! Freedom of speech really is quite something.” India is relatively good at freedom of speech, but even there, I couldn’t imagine that you would be a mile from the president or the prime minister’s office and actually see books that were making fun of the prime minister. Alejandro: Absolutely. In Spain, for example, if you talk bad about the king, back in the day, you would be put into jail. I can see what you mean with that. So here in Capital One, you lasted for a few years before you got into Bain. I know that Bain was a big breakthrough for you and the way that you perhaps broke big problems into small problems to tackle them and make something happen. Tell us about landing in Bain and then going back to India to open Bain there. Gautam Tambay: Joining Bain was actually a pretty interesting journey for me because, at the time, Bain only hired you straight out of college or straight out of business school. There was no you worked for a couple of years, and then you enter Bain. That wasn’t a thing. So what I did was, the closest school in D.C. – actually, I lived in Richmond, Virginia at the time. The closest school to Richmond, Virginia, that Bain hired at was UVA, the University of Virginia in Charlottesville, and that was about a two-hour drive from where I was. I saw online that they have an employer information center for people who go to UVA, and I hopped in the car and drove out. I put on my best clothes, and I said, “I’ll just show up there and see what happens.” I tended the talk, even though I wasn’t a student at UVA, and at the end of it went up to the partner who gave the presentation, and I said, “I don’t go to school here, but I’m really interested. I think I have some great experience, and I would love to apply.” He said, “Sure. Email me.” Which I did, and I had no expectations of getting a response. It turns out that something about what I said to him on my resume spoke to him, and he actually ended up giving me an interview, which was great, not just from the fact that it helped me break into this new role or opportunity, but also it was great validation of the fact that you miss 100% of the shots that you don’t take. If I had just sat there and said, “Bain doesn’t hire from anywhere outside of college, and not taken that shot, I would never have gotten it. I ended up being the first person, at least from Boston, that they had hired not directly out of college for that undergraduate program. Alejandro: This, for you, was an interesting journey with Bain. There are so many people coming out of McKenzie or Bain. Why do you think consultants make such great entrepreneurs? Gautam Tambay: Yeah. That’s a good question. I’ve wondered about that. Is it that it’s the training that you get in consulting that makes you a better entrepreneur, or do people who are well-suited to be entrepreneurs seek out those consulting jobs early in their career? I’m not sure whether there’s causation or correlation. But I do think that there are things I learned in my two-and-a-half years at Bain that have stayed with me throughout my career. As you were saying, taking any problem, breaking that down into its components, being able to hone in on what is most important in any given situation. That’s something that consulting trains you well to do. That was really valuable. Alejandro: After this experience with Bain, then you go to business school; you go to Wharton, and, obviously, great entrepreneurs, as well, coming from Wharton. But this was a really nice segue to moving to San Francisco. There, that was your first exposure to the startup world. I’m sure that was quite eye-opening, as well, for you. Gautam Tambay: Yeah, absolutely. When I was in business school – and it is sort of funny. I thought I was going to go to business school to learn entrepreneurship and actually become an entrepreneur. I now routinely advise people that if what they really want to do is something entrepreneurial, then they should skip grad school because they frame the problem as they have two years and $150,000 to invest in your entrepreneurial career. Is business school your best investment? Nobody framed it like that to me. In hindsight, again, I feel very fortunate for having had the learnings and the friends that I made at business school, but I think there was no better training for entrepreneurship than just joining a startup. So coming out of my business school class in 2010, it was the unusual thing to do. I had done my internship in private equity. Most of my classmates were going to Wall Street or consulting jobs. So they thought I was a little crazy to come join a no-name startup in San Francisco. There were only a handful of people in my class who did something like that. I think coming to Silicon Valley just completely changed my perspective on entrepreneurship and gave me a lot that I have now used in my career. Alejandro: Here, while you were in InMobi, the mobile advertising company, it literally went from 80 people to hundreds. This was an opportunity for you to really see a company growing so quickly, but then, as well, to see what goes well and what goes poorly. What were some of the lessons that you took away from the experience here? Gautam Tambay: I think a couple of things that I learned from the founder, Naveen Tewari, and CEO of InMobi that did he did really well – first, I had applied to a business development job at this mobile advertising startup coming out of business school. I had never worked at a tech company, and I had never worked in business development, and I had never worked for a startup. Naveen had the foresight to say, “I’m going to take a bet on this person.” He didn’t have to. He could have found more traditional candidates for the role, but I think that was really empowering for me. Then, it goes further than that. I think Naveen was the master of and still is in hiring great people, and then empowering them, and letting go. An example of this was about nine months into my time at InMobi; we had an opportunity to acquire this company, which was super interesting and could be very strategic for us. I think the whole company at the time was maybe 150 people. Naveen said, “Why don’t you come along with me to this company. We have this conversation with the founder of this company to be acquired.” It turns out they’re also being wooed by Google and by Apple to be acquired by them. Alejandro: Wow! Gautam Tambay: This is at a time when InMobi had raised maybe a total of like 20 million dollars, and we didn’t have a lot of money in the bank. We walked out of that meeting. The meeting had started at 6:00 pm. We left the company’s offices at around 11:00 pm, and then Naveen and I went to a coffee shop in San Francisco, and literally on the back of a napkin, and says, “Gautam, you’re going to run this deal and make this happen.” I’m like, “Are you kidding me, Naveen? I have never run an acquisition; I have never done anything of this sort. This is critical to the company. You’re going up against Google and Apple. Do you really want me to do this?” Then Naveen said something that’s always stuck with me. He said, “Listen. I’ve never done an acquisition either, so one of us is going to have to learn it and spend 50, 60, 70 hours a week getting up-to-speed and making this happen – better you than me because then it lets me focus on other things.” First of all, it was mind-blowing that that’s how he thought. Then, in hindsight, two things: one was so empowering for me. I’ve never worked harder. That was the next eight weeks. This was my life. It was a big, big opportunity, so I was like, “I’m not going to let him down.” The second thing was like Naveen said, it actually enabled him and empowered him to do other things. The story ends well. We won that deal with an all-startup acquisition against Google’s and Apple’s cash offers. Then the startup acquisition ended up being definitive to InMobi’s journey. So, hire great people, and empower them, and let them run with big things, and step away, and have the courage to do that as a founder. That’s something Naveen did really well. In terms of things that could have been better, I think that as they went through that hypergrowth phase in raising 200 million dollars and expanding the team from 100 to 800, I think a lot of things broke down in corporate communication, alignment, culture, which over time, we had to go back and fix that, but I think there were things we could have done better from the beginning in setting those things up for success. That’s something now that we take very seriously at Springboard as we are going through that phase of hypergrowth. Alejandro: So, let’s talk about that. What made you make the switch and say, “I’m going to do it myself and take the leap of faith, and I’m going to make it happen on my own.”? Gautam Tambay: Yeah. I loved how much I was learning at InMobi – hypergrowth, really good people to work with. One thing that I didn’t care much about personally was the industry we were in. Mobile advertising didn’t get me out of bed. So I was like, “If I’m going to leave and do something of my own,” which is an itch that I had always had – in fact, I was very open about that with the InMobi founders when I joined them is that I have this itch to do something on my own. I was like, “If I’m going to do something, then it has to be something I care deeply about to be able to wake up and do this for the next ten years or more even if all the chips are down.” I was like, “What problems do I care deeply about.” I had grown up in a family of educators. Three of my grandparents were teachers. Both of my parents have been teachers. My mother was a school teacher, and my dad is a retired army officer, but he now teaches at the University. So, education runs in the family. Then around that time, I saw my sister. She was an illustrator. She applied to go to grad school to learn UX design, and then decided that she couldn’t bring herself to pay a $100,000 loan, and decided not to go to the schools that she got into. That was similar for me in realizing like, “Wow! There’s got to be a better way in this day and age to help people get the skills they want to get to the careers they want. That’s what got me into the education space. I met my co-founder along the way, and she had a very different motivation but strong reasons to want to do something in education. We had lots of common friends and started working on some ideas together. That’s how we got started. Alejandro: Tell us about the early days. What were some of the early days like? Gautam Tambay: Tough. I think the first couple of years, and I’d say until we had product/market fit, were challenging. There’s this phase in a startup’s journey, which is existential, where you don’t know if you’re doing something that’s going to have value. You’re spending a lot of time and energy in this, and everything is, at the time, unclear. That’s also when people are questioning you the most. My father-in-law who is a man I really love, and I know he cares about me. He would ask me, “When are you going to get a real job?” He’s doing it out of caring, but that’s not how it sounded to me at the time. I think that’s when people are questioning you, and I think that existential phase was tough. I think the thing that helped is just having a group of people around me: my co-founder and our early team members who were just having a good time together. I think there are going to be ups and downs, but there’s this small group of people who are just going to battle with every day, and as long as you’re enjoying it, and enjoying every day, that is, at least for me, what helped carry me. Alejandro: Absolutely. What ended up being the business model for Springboard for the people that are listening to get it? Gautam Tambay: Yeah. That’s a great question. Today, we enable people to transition careers through intensive online programs into what we call new economy careers. For example, if you want to become a data scientist, you want to become a designer; if you want to become a software engineer, if you can take a Springboard program, that’s going to be nine-months long. It’s completely online. It’s very intensive, and every single student gets paired with a mentor from the industry who works with them one-on-one every week on a video call. What we do that’s unique is we say, “At the end of the program, we guarantee that you will get a new job in the field that you’re looking for, or we’ll refund you entire tuition. We’ve had thousands of people come through our programs. We’ve had to issue less than a couple of dozen job-guaranteed students. Alejandro: Very cool. I know that for you and for your co-founder, there was an event that certainly saved the company, and it was that moment where your team members pulled you out and said, “Hey, guys. This is what we’re seeing.” And that was a big breakpoint for you guys, so tell us about this. Gautam Tambay: Yeah. Thank you for asking that. This is 2016. The team was about 15 people at the time. I think maybe 16, and we had not raised a lot of money. I think we had raised a small angel round; maybe we had raised a million to a million-and-a-half dollars to date. We hit a point where revenue was declining, and at the same time, we had three or four months of runway remaining. That’s one of the hardest things that you can have is you see that you’re going to basically – for my co-founder and me, it was like this was our dream, and we could see it in front of us going to nothing, and we’d be letting down everyone. We’d be letting down our investors, our customers, our team, and that was a really scary moment. Our instinct, at that time, at least mine, was to go into a shell, like pull the blanket or covers over you and not come out. The last thing I wanted to do. So my co-founder and I were extremely stressed about this. Obviously, this was eating us up because when your revenue is declining and you’re running out of money, that’s the worst time to try and raise outside capital. One evening or afternoon, three of our early team members, Monique, Phil, and Roger, said to my cofounder and me, “We want to take you out for dinner.” We said, “Okay. Sure.” They took us out for dinner, and they said, “Guys, what’s going on? The numbers aren’t looking good?” We said, “Yeah, we know that.” They said, “Well, so why are you not stressed about it?” We said, “We are really stressed, and we’re not sleeping.” They’re like, “Okay. Why are you not involving us? How much runway do we have?” At that point, they asked me point-blank, and I’m not going to lie. I said, “Three or four months.” They’re like, “Well, why are you not involving us? What have you done so far?” We said, “Well if we thought that if we told you all of this, you would leave, and that would make things worse.” At that point, they said something, which has always stayed with me. They said, “If that’s what we wanted to do, we would have joined Google. We didn’t join this company to leave when things are bad. We joined because we want to be part of a story and build something. That’s why we are here, so you have to involve us.” It’s like I can remember this moment very visually where I was sitting during this conversation because it really has been one of the biggest leadership lessons in my career is that if you hire the right people, which thankfully, we had, then when you have a problem, and you have bad news, you wanted to [23:56]. My job as a leader was to be a **** umbrella, to protect everybody from bad things, and what I realized is, if I didn’t do that, and I let the bad news flow, I’m going to have 16 people working on the problem instead of two people. So, the next day, we talked to the whole company; we were very transparent and said, “This is what’s going on. We need to turn this around. We had a plan here, which was every single person, no matter what your job, you can be an engineer or you can be a customer support person. Everyone is going to work on a revenue project.” We had a plan to get us to break even in five months. When [24:35] and I said, “We’re going to go to every investor who in the past we’ve said no to, or they’ve said no to us, and we’re going to say, “Get any amount of capital that we can to extend the runway a little bit. Of course, we’re here to still tell the story, so, obviously, you know the story ended well. In four months, we got to break even, and we were able to raise a million-and-a-half dollars, which was a lot for us at the time. We went from a background of our money to the scale where we would break even and even have money in the bank. I was just the engineer, and the company wouldn’t even exist today if we hadn’t had that come-to-Jesus moment with our team saying, “You need to involve us.” Alejandro: That’s amazing. For an operation like this, you’ve raised a little bit of money. How much capital have you guys raised to date? Gautam Tambay: We’ve raised 53 million dollars to date. Alejandro: I believe that during one of those fundraising rodeos is the very first time when you and your co-founder had the voice raised against one another. So, what happened there? Gautam Tambay: Yeah. I just told you the story of when we turned things around, and the reason we were in that place of not having capital and possibly running out of money was because six months before that, we had tried to raise a Series A round. It was a grueling process. One of the things about fundraising is, you get good at one type of fundraising, and then the goalpost changes. After a couple of years, I got good at raising seed rounds. The Series A process is a totally different process. We had gone through this extensive six-week process, and I was the one doing most of the fundraising conversations. At the end of that six-week process, which was grueling, we had one term sheet. It was a top-tier Silicon Valley investor, somebody who everybody knows, and the catch was, it was what was called crushed deal, which means that wanted to give us half the money immediately, and they wanted to have the option to give us the other half of the money a year from then but completely at their option but at the same valuation, which is basically like wanting to have your cake and eat it too. Everyone we talked to, every advisor said, “Don’t take the deal. This is not entrepreneur-friendly. This is bad-fair business – the signaling risk.” Basically, if things are going well, they’re putting the same amount of money, the second crunch at the same valuation, which is not good for you. Things are not going well. They were not putting the second crunch, which sends a really bad signal to anyone else. Common sense, as well as all advice, said that this was not a good idea. But I, at the time, was like, “This is the only deal with have, and I have worked so hard for six weeks to get this that I think we should take it.” My co-founder was steadfast, and, of course, the good thing was that she had distance. I was emotionally embroiled because I was the one fundraising, and I was the one facing rejection. She had the distance to say, “You know? I don’t think we should do this. We should walk away from it, or we should hold a hard line, push back, and tell them what we want, and if they don’t give it to us, we walk away. I remember a conversation in her living room where we were having this argument, and I hadn’t slept much the night before. Virtually, we were close to screaming at each other. Thankfully, I listened to her, and that was the right thing to do that we walked away from it. But in the moment, it was one of the hardest things I’ve done. And, of course, six months later, we ended up faced with possibly running out of money, which made it even harder. But now that I have five years of hindsight from it, and so it was totally the right thing to do. Alejandro: In this case, this is very interesting that you point this out because typically, the best deals are accomplished when you are completely unattached to the outcome. Gautam Tambay: Totally. I think that’s such a great point. I think that you want to be dispassionate, and I think in the moment, I was tired, I was emotional, I was exhausted. One of the many, many great things about working with a co-founder, and especially for me having worked with my co-founder is, when one of you is in the thick of something, the other person has the ability to be dispassionate and to have distance. In those moments, listening to the other person is what helps you – this person has the exact same incentives as you but has more distance from the situation, so listening to the other person almost always is what leads to the better outcome. Alejandro: That’s a very good point. There’s one thing here that you had to encounter, which everyone that is listening right now to this episode is also going to encounter or has encountered in their own journey of building and scaling, and that is, unfortunately, letting a person go. This case, for you, was an executive, so how was that experience for you? Gautam Tambay: Yeah. Thanks for asking. One of the things I’ve learned is by the time you realize that somebody on your team is not performing or is not able to do what is most important for the organization, odds are that everybody else already knows and has already figured it out, and often, you realize that the last. Usually, their peers and their director are the ones to first figure it out. So, I had this thing of like, “Wow. I have this person on my team. I don’t think they are quite the right fit. Not because they’re not competent. In fact, the very fact that we hired them meant they were very, very competent, but they were not the right fit for this job at this time. One of the fears you have is like, “What is it going to do to team morale? Odds are that if you’re having that conversation in your head, the emotional response of the team when you actually make that decision is likely going to be relief because they’ve already figured this out. Often, the emotional response for the person also – there will be some anger and some denial, but eventually, when they go home and think about it, it’s also often relief because they know, also, that they’re not the right fit for the job. But doing it for the first time, especially with a senior person, for me, was not easy because it felt like I was letting them down, partly because especially when in an executive role, when somebody fails, it’s as least as much on me for either having made the wrong hire or not onboarding somebody successfully. I think part of it was me coming to terms with the fact that I had failed in hiding and onboarding the right person. Alejandro: Yeah, and one of the things, too, that happens when you’re at this point, and maybe it has happened to you. At least, it happened to me is that you tried to reorganize things. You tried to put that employee on another role, and it becomes a toxic type of environment that you’re creating. Gautam Tambay: Totally, and thankfully, I was very fortunate to have good advice. While I was like, “Maybe we can move the person to an advisory role,” I had good advice. I have a board member who’s been an entrepreneur twice, and he’s great at giving tactical advice. I had a couple of other advisors and other CEOs that I could call and talk through this. Thankfully, we took the clean way out, and that really helped. It is the kind thing to do to relieve them and let them find what is great for them and what they’re going to be great at. It doesn’t feel like that in the moment, but you’re actually doing the right thing. Alejandro: Absolutely. Gautam Tambay: For what it’s worth, this person is thriving in their other role. It’s not surprising. I think they’re super competent and a really accomplished person, just not the right fit for the job. One of the lessons for me was, which I think Ben Horowitz talks a lot about in his writing, is especially when hiring executives, don’t hire in a single casting. You want to hire the sales leader who is right for your company at your stage, not this incredible sales leader who built the sales function at Facebook. That’s probably not the right person for you. One of the things we’ve done since then is every time we open a new exec rec, we’re just hiring a CFO, so I did this last night, is we rank order all the – we make a list of all the possible skillsets you might want, all the experiences you might want in a person, and as a group, the candidates, which four or five of these are a must-haves for the next 18 months. Then, everything else is not important. When you go through that exercise, it’s very clarifying. If I had done that exercise when I hired the executive a few years ago, I don’t think we would have hired that person. Alejandro: That’s interesting. I also know that part of hiring, too, for you that values are very important. How do you think about values when you’re hiring people? Gautam Tambay: That’s a great question. One of the things early on that people would say is, “Is somebody a culture fit?” Over time, I realized that what culture boils down to, it’s not about ping pong tables; it’s not about happy hours. We do all those things, but it really boils down to what behaviors as a group are we going to reward and incentivize, and what behaviors will we not stand for and penalize? That’s ultimately what becomes your culture is what you do. If you think about what behaviors you reward and what behaviors you don’t stand for, that’s basically your values. Culture is synonymous with value. Now, when hiring, somebody says – it doesn’t happen anymore because we’ve institutionalized the company, but earlier on, when people would say, “I think this is not a culture fit.” The question I would ask them during the interview debrief would be, “Which of our seven values is this person not aligned with?” Because otherwise, you’re just saying that this person doesn’t look like me, or I don’t relate to them because my life experience is different than theirs. Let’s talk about are there values in this? I think one of the ways we realized that early-on was when we were a small team – I think we were 20 people or so, we had a team in San Francisco and a team in Bangalore from the get-go. From day one, we had two offices, and we would bring these teams together for an offsite in some other part of the world. I remember this was in Thailand. Going into this offsite, I remember being very stressed because there were eight or nine people in that staff, and there are eight or nine people in Bangalore, and we’re going to get to this offsite, and then the Bangalore engineers are going to be totally differently culturally from the SF business product and ops teams, and we’re going to have to force people to interact, and it’s going to be really awkward. Our offsite began on Sunday. I got there Monday morning because I was coming from a wedding, and what was mind-blowing for me was that people had chosen – at the time, the company was small, so we got an Airbnb, and there were no assigned rooms. People had chosen to room with each other across offices. By the time lunch came around, people were breaking into small groups, just organically, that were mixed groups. We didn’t have to do anything to force them to interact. That was surprising to me. But then, my co-founder and I were talking about this, and we were like, “Wow! This is great. Why is this happening? We must have done something right.” In that moment, we realized – this was before we had formalized our values or institutionalized any of the things that we have in the company today. We realized what was happening was, we were hiring for the same set of values, so even though you would expect that somebody who is an engineer in Bangalore would be very different from an ops person in SF, we were looking for the same things, which were: open, honest communication, and the ability to take ownership. We were looking for people who were mission-driven for the company, and we were looking for people who were really excited about learning and were intellectually curious. When you hire for the same values, people get along easily. Alejandro: Absolutely. How many people do you have now, Gautam? Gautam Tambay: Two hundred. Alejandro: Wow. That’s quite a number. Imagine that you go to sleep tonight, and you wake up five years later – insane snooze. You wake up in a world where the vision of Springboard is fully realized. What does that world look like? Gautam Tambay: First of all, when you find that five years, make sure and send them to me. [Laughter] Alejandro: Yeah. Gautam Tambay: Sometimes, I have trouble sleeping for more than six or seven hours. That’s a great question. For generations, we’ve been in a world where people had one job or two jobs throughout their career. My dad has one job in his career. Most people in our generation, they’ve had a couple of jobs in their careers. The average millennial is going to have 15 jobs in their career. It’s a fundamentally different world than we have ever lived in before. While the economy and work have completely changed, education is still stuck in the same place it was 500 years ago. That creates a massive opportunity for change. We believe that this current generation will, instead of consuming all of their education upfront until their mid-20s, instead, they’ll go back to transformational learning every few years, every five to seven years. So instead of spending $150,000 on a Master’s Degree when you are 25, you’ll spend maybe $10,000 six times in your career every five years. If you’re going to do that, you have to do it from anywhere in the world from the comfort of your couch in your pajamas, but still be able to have the transformational career change that you want. So we set for ourselves a goal at the start of this year that by the end of 2030, so in ten years, we want to transform one million lives, which is to put a million people into careers they love through our intensive online programs, which means that by that point, you’re going to be going home for Christmas, and your cousins will have taken a Springboard program. Or you’ll be hiking in a new country when that’s possible again, and you’ll see people in a Springboard sweatshirt because they’re graduates of the program, and you’ll see Springboard alumni in top places in the world, in powerful leadership positions and hiring back from the program. I think transforming lives, that’s what we do, and we want to transform lots of people’s lives because when you do that, you change not just their life, but that of their community and the people around them. Alejandro: That’s amazing. One of the questions that I typically ask the guests that come on the show is if you had that opportunity to go back in time, Gautam, and have a chat with your younger self, maybe that younger self that in 2013 was about to launch Springboard. Now, knowing what you know, if you could go back in time and give yourself one piece of business advice before launching a business, what would that be and why? Gautam Tambay: That’s a great question. I’ll give you two. One is, start early and take the plunge. Life is too short to be doing things that you’re not fully committed to. This is the advice I would give to maybe going back to 2005, where I would say, “Take the plunge and start a company earlier. You keep telling yourself that you want to learn things before you start a company.” To [41:08], the advice I would give is, most importantly, don’t get stalled by decisions. There are times when you are facing a challenging decision, and what ends up happening is you get stalled and stuck and don’t make any decision instead of stay in this limbo. That’s the worst thing you can do for a business or the worst thing you can do for even people around you. So it’s better to make a wrong decision than to make no decision. I feel that’s something that, in the first few years of the company, I learned the hard way. It’s like climbing a mountain. The worst thing you can do is stay still because you’ll freeze to death. It’s better to go in the wrong direction because then you can get some information and you can come back. So, just keep learning and getting information, and every time you make a decision, it leads to learning. Alejandro: Absolutely. 100%, Gautam. For the people that are listening, what is the best way for them to reach out and say hi? Gautam Tambay: Springboard.com is our website. I am email@example.com. I’m always happy to hear from other entrepreneurs, founders, people who want to go down this journey. I had a lot of help in getting this far. I can never pay it back; I can only pay it forward. Alejandro: Amazing. Very, very profound. Gautam, thank you so much for being on the DealMakers show today. Gautam Tambay: Alejandro, thank you for having me. This was a fantastic opportunity, and I’m excited to see what people have to say about this. * * * If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at firstname.lastname@example.org.
38 minutes | 20 days ago
Michael Mueller On Raising $60 Million To Build The Future Of Payments In The Cloud
Michael Mueller is the cofounder and CEO of Form3 which is a cloud-native connectivity, payment processing, clearing and settlement services to Financial Institutions and Fintechs globally. His company, Form3 has raised $60M from top-tier investors like Mastercard, 83North, Draper Esprit, and Nationwide Building Society. In this episode, you will learn: The keys to effective remote working Making and avoiding major pivots How to reach out and find out about new job openings His top advice for new entrepreneurs SUBSCRIBE ON: For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here). Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below. About Michael Mueller: Michael set up Form3 after spending more than 25 years in executive positions with Deutsche Bank, Royal Bank of Scotland and Barclays. Most recently, he was Global Head of Cash Management and a Member of the Corporate Banking Executive at Barclays, where he had responsibility for the product management and distribution of the bank’s payment, corporate deposit and customer access products. For many years Michael has been passionate about driving digital change and innovation in global banks and has sponsored many key initiatives in this area, including white-labeling, biometric security, and mobile payment/banking technology. Re-engineering payment back-office systems in response to industry developments, customers demand, capacity constraints, cyber threats or cost challenges has been a strong focus of Michael’s work during his time in financial services and as the CEO of Form3. Michael holds a degree in Organisational Psychology and a Master of Business Administration from INSEAD. Connect with Michael Mueller: Crunchbase LinkedIn Twitter Read the Full Transcription of the Interview: Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we’re going to be talking a lot about payments and fintech, so I hope you’re all excited about this segment because there’s a lot going on here, from scaling to raising to moving from one country to another. It’s going to be filled with great stories, too. So without further ado, let me welcome our guest today. Michael Mueller, welcome to the show. Michael Mueller: Thank you. It’s great to be on the show. Alejandro: Originally born and raised in Germany, more specifically, western Germany, so how was life growing up there? Michael Mueller: Oh, it was great. It was fantastic – small-town Germany, so a very protected upbringing in that respect. Yes, fantastic. Alejandro: Was there any influence, perhaps like in your family? Did you have anyone in business or having their own business, or what would you say ended up motivating you to become an entrepreneur? Was there any influence there, or you perhaps developed that later on? Michael Mueller: Much later on. After school, I actually started working for a bank, Deutsche Bank, at the time. In Germany, we have that apprenticeship system, so vocational training that you can do in the banks. I actually wanted to become a banker, and I did become a banker, and I was a banker for many years before I became an entrepreneur. Alejandro: Let’s talk about that because your first gig was in Deutsche Bank, and you were there for quite a bit, even moving from London to Frankfurt, then back to London. It’s been quite a ride there, so how was it working for a bank as big as Deutsche. What did you learn there? Michael Mueller: It was a great time, and I’m immensely grateful for the time that I could spend there, and I learned a lot. I also learned a lot of skills and background that is still relevant to this day. Obviously, like any of these big banks, it doesn’t feel like you’ve been there in a single job or a single environment for more than 20 years. You move around a lot. I did move around a lot. I spent some time in Germany. I worked with them in Singapore and Sidney, came back to Germany, and worked for them in London. So they could give you a lot of opportunities. But very early on, I gravitated toward one particular area, and that was transaction banking and payments. I thought it was really interesting. I think many of the listeners will probably think there’s not much in it as a low-payments point of view. What could possibly be interesting about payments? But when you look a bit closer, you find out that it’s a very interesting crossroads between banking and business, on the one hand, and technology on the other. I think that always fascinated me, and it’s still fascinating me to this day. Alejandro: In this case, while you were in Deutsche, many, many things happened. Obviously, one of them was getting your NBA, and I’m sure that experience for you was quite unique because you were a little bit older than perhaps your classmates. Is that right? Michael Mueller: [Laughter] Well, I wasn’t so much older than my classmates, but I was still older than probably most people who get their NBAs. It was an Executive MBA. I got the opportunity to spend some time at INSEAD after almost 20 years in banking. And that was fantastic. You really appreciate the opportunity to listen to interesting lectures, to meet people from other industries, and spend some time to think about the business, think about trends, and also get the take on the challenge of sitting through exams and see if you can still do it. So it was a fantastic time. Deutsche Bank allowed me to take a bit of time off to achieve that, so I basically called it a half sabbatical where I was basically working part-time. At Deutsche, I was on campus in France and in Singapore and in Abu Dhabi – so a really, really good time, and I learned a lot. Alejandro: Would you say that this was perhaps one of the key factors in planting that seed as an entrepreneur later? Michael Mueller: It’s very hard to tell. I think my fellow students will probably say no because all I was talking about at the time was banking and my career in Deutsche Bank. I had a career in Deutsche Bank. We should also not forget this was in 2010, so that was just after the financial crisis, and we had gone through some really interesting times. So, at that stage, I think I would describe myself still as a career banker. Alejandro: Got it. Still, while at Deutsche, once you go back, there was one of the moments that you were living there – it was the 2008 crash, and I believe this was one of the most tense moments that perhaps you experienced. So, how was that for you? Michael Mueller: It was, indeed, very tense. At that stage, I was responsible for non-bank financial institutions, and that included a lot of hedge funds and a lot of the vehicles that were used for securitization, a lot of interbank payments, and all the rest of it. I think the interesting thing at that stage – well, at the time, it wasn’t so interesting; it was just tense. But the payments work when there’s liquidity and money is going around. In a crisis situation like that, liquidity dries up. Credit lines dry up between financial institutions. So we were frequently in situations where you had to make decisions about releasing payments that were sort of life-threatening either for your customer or for the bank because the amounts involved were big enough, and if it had gone wrong, it would have added to the worries of the time, and it certainly could have had the potential to bring some parts of the industry down. So, every afternoon, we were sitting with our risk teams, with our senior management teams, with our technologists just before the cut-off times, and we were scrambling to basically find the liquidity to make those payments, and from a payment’s perspective, probably the most exciting, but also a tense time that I’ve lived through in my banking career. Alejandro: In this case, talking about your banking career, obviously, a very extensive banking career, we’re talking about 20 years or more where you went from Deutsche, then you did Barclays, RBS, and a little bit of everything, and jumping around. So that gave you a great perspective on the space, and perhaps the problems and how to bring a solution. Now, when we’re talking about a solution, bringing a solution, at what point would you say that your baby, Form3, started to really incubate, and what was that process like until you said, “You know what? I need to take action; I need to take the leap of faith. I’m leaving this career of decades that I put all my life into, and I’m going to start something that is completely the unknown.”? Michael Mueller: I was at Barclays, at the time, and at Barclays, I was responsible for cash management, which is basically all of Barclays’ payments, online banking channels in the corporate space, and a lot of corporate liquidity, so a fairly big business. Our products were generating revenues of about 2 billion pounds, and I had a lot of product responsibility and a rather big team of about 500 people in the UK and Europe and Africa with [09:56] in the U.S. and in Asia. What I also had was what we called Change the Bank Budget, which is basically the money that you put aside for investments in technology. That was quite sizeable in Barclays and as it is in most major banks. The frustration that I had over many years is basically that such a large part of that budget did not actually go into innovation; it went into keeping the lights on; it went into regulatory and mandatory initiatives; it went into software upgrades and similar things. Really, investments that did nothing for the inclines that banks needed to make to ensure that there is resilience in the system and stability and all that. But it was really frustrating that so much money went into this, and that led to the conclusion on my part that most of the technology that you could actually buy is not very good if it requires that amount of investment to just keep the lights on. There must be a better way. That coincided with the fact that cloud-native computing became a thing, and it was about four-and-a-half to five years ago where I think a lot of the technologies around that reached the level of maturity that you could actually consider using them for mission-critical services in the financial industry. So a few things did come together, and that sparked my interest in trying to find an answer to the question, how could you apply these new technologies, component-based architecture, microservices, APIs, and all of that in a payments back-office, which is not a natural starting point for any of that? That’s where the idea came from. When I came across a few investors who were working on a similar idea, there was a meeting of minds, and that was really the birthplace of Form3. Alejandro: So, then, what were the next steps? Michael Mueller: You kind of slip into this. It was, obviously, working with those investors to form a company, trying to find like-minded people, and the most important ones for me, at the time, were I needed to find a Chief Product Officer, and I needed to find a Chief Technology Officer, and also a Chief Customer Officer, so people who were willing to come with me on that journey. I think it was the 15th of August, 2016, when the four of us walked up in the region office, somewhere nears King’s Cross in London. We had a company and a few hundred pounds of seed capital. Alejandro: Interesting. For the people that are listening to really get Form3, what ended up being the business model? Michael Mueller: The business model is actually quite simple. That is, we take care of payment processing in banks’ back-offices. So, what does that mean? I think all of your listeners will have a bank account somewhere, and everyone will have a way to access that bank account, either through a mobile application, or through an online banking system, or through ATMs, or whatever you use. And we’re not dealing with that, so we don’t build any technology that customers can use to initiate payments. But then the next question is, what happens once you have initiated that payment, and that’s where we come in. So we pick up the payment. We validate the payment content. We convert formats. We take it through a whole range of different processes, and we hand it over to what we call a gateway, which effectively connects that bank to the clearing and settlement. The clearing and settlement in most countries is a centralized infrastructure that deals with the exchange of value between the banks more and more in real-time, which means that payment message goes to the clearing system, arrives on the other side, and becomes an inbound payment. We also process inbound payments; we take it through workflows and then hand it over to the ledger in the front end. No end customer will ever see our technology, so it is something that runs deep in the bowels of the bank, but it’s quite crucial and quite an important part of a bank’s infrastructure because it really means that banks can actually execute payments 24/7, 365 in real-time. And when I say real-time, it is, obviously, very fast, so the average payment that goes through our platform takes about 500 milliseconds to process end-to-end. Alejandro: And, in your case, going from banker to a tech entrepreneur. That’s quite a transition. Was it that hard for you? Michael Mueller: Yes, and no. When you start that journey, you don’t really know what that would actually look like. As I said earlier, I did have a decent amount of interaction with technologists, and I was, in my product role, responsible for a lot of technological innovation in banks, and that means I did interface with software engineers and project managers and all that. However, running a tech company is quite different from working in a larger bank. First of all, the company size is, obviously, a lot smaller. We’re about 180 people at the moment – growing quite fast. But, also, I’m working with engineers and product managers a lot more directly, and that’s really exciting if you can bring together deep product expertise with some of the best engineering that is available in the market in a very agile format. It’s fantastic and really exciting, but it required me to adapt. The biggest requirement there was to move from what is still a prevalent project methodology and in large banks or from a waterfall-type methodology onto something that’s a lot more agile and a lot more flexible, a lot more effective when it comes to building high-end technology. I learned so much on the way, but I’m also very grateful for the people who came on the journey with me to help me build that organization of that company culture that delivers these results to customers on a daily basis. Alejandro: As we’re talking about learnings, there was a major pivot that you guys went through. So what happened there? Michael Mueller: When we started the company, the idea was to make a payments environment available to customers on an interim basis. The idea was, if it’s hard and expensive for Barclays to maintain that environment, it must be so much harder for smaller to bank service providers who don’t have the same kind of budget. The idea was to go into the market and find those technologies, deploy them in the cloud, make them work end-to-end, and make the product more outcome-based in terms of providing a payment service that digital banking providers and payment service providers could use. So we started off on that journey, and we went around the marketplace and looked at various technologies that we wanted to deploy. Every single time that we came back from any of those meetings with the big software vendors, who were all quite happy to sell it to us, we had a conversation internally, and the view was that none of that was actually built for the cloud, and none of that would actually be effective in the cloud and would give us any of the benefits that we were trying to achieve. So after six or seven months, we had that conversation about what do we do? Where do we go from here? We decided to build it ourselves, so not rely on third-party technology at that stage, but build it from the ground up. In hindsight, that was a brave move. It wasn’t an easy move to fully invest in IP, but it was the best decision we made. It took us about a year from that decision before we went live with the first product for a bank. But even that, I think, was an amazing achievement, so to build weapons-grade, fully scalable, highly secure technology that a bank can actually use in that timeframe with that budget that we had available was a big revelation. That’s when I thought, “If that is possible, there’s so much more you can do with that technology.” That’s the path that we’re on. Alejandro: Got it. One of the things that is true here is that you embarked on this path, and you were pushing along, but then there was a breaking moment in 2019 with Tier banks moving into cloud-native technologies. Tell us about this. Michael Mueller: We always thought that large banks and small banks would all move to a platform-based architecture at some stage. Though, from my own experience as a banker, I knew that the cost space of legacy architecture will no longer be sustainable, that there are security issues with legacy architecture that you can’t necessarily fix within the environments that banks are running. But also, and most importantly, that legacy architecture does not give you the agility that you need to bring new products to the market. So increasingly, the Tier 1 banks were falling behind in terms of the technology choices that they made in comparison to the digital challenges, the N26s, and the revolutes of the world. So we knew that at some stage, the big banks would wake up and look at this technology and come to the same conclusions that the challenger banks would actually come to. But we didn’t know when, so it was really interesting when at some stage, we received that phone call from a Tier 1 bank to request the quote for all of their call volume that they wanted to transfer to our platform. That was bigger by order of magnitude compared to anything we had seen previously. We thought that this is really an interesting sort of exercise that we would go through, but not necessarily. We didn’t necessarily think that it would actually happen at that stage because we were a company with maybe 100-120 people on the payroll, and processing these kinds of volumes, we thought, might be a bit of a stretch. Now, we worked through that. We worked through the RFPs. We entered those workshops with these banks, and I’m very happy to say now, they have made the decision to transfer these volumes over to us, that they fully buy-into our vision of the fully cloud-native technologies stack. The Tier 1 banks sacrament at the moment is the one that is growing the fastest and also a customer portfolio. We’re also dealing with smaller banks, digital banking providers, and payment service providers, but increasingly, we’re working with some of the largest banks on the planet who are all very keen to take the benefits of this technology and make that available to their customers. Alejandro: So, to enable this, it requires money. So, how much money, Michael, have you guys raised to date? Michael Mueller: We went through four funding rounds so far. I think we’ve raised; if we exclude the secondary, we’ve already given some money back to our very early investors. If we exclude that, we’ve raised about 45 million pounds to date. Alejandro: What if we include the secondary? Michael Mueller: The secondary, that would take us to about 50 million pounds. Alejandro: Got it. Very cool. Michael Mueller: Yeah. That’s also been an interesting journey, obviously. Not being a serial entrepreneur, many of these funding rounds were a first for me – all of them, actually. All of them were different, but all of them had a good outcome in the end. So a seed round with angel investors, an A round with early institutional investors, a B round with first proper VC engagement, and a strategic funding round that we announced in the summer with some very large financial institutions coming in plus more VC money. Alejandro: Which one would you say, Michael, was the most challenging for you guys? Michael Mueller: The strategic investment round, by far. We were talking about three strategic investors who were driving this. One of them has yet to be announced. That will come in the next couple of weeks or so. But the challenging part of that was basically that we had to land major commercial contracts, which are the precondition for the investment, and the investment, all at the same time with three different counterparties. So you’re talking about three major enterprise contracts, plus three major investment documentations to lend all on the sixpence at the same time was complicated and probably the most complex one that we’ve done to date. Alejandro: I can imagine. When you’re doing a round, and for something so specific, like around financial technology, I’m sure that you were looking for, perhaps, past experiences, and how you were able to leverage some of that institutional knowhow or even network of those investors. What were you really looking for in those people that you were bringing on board? Michael Mueller: For me, the most important thing is that they really buy into the vision for the business. Again, the angel investors gave us the benefit of the doubt. The funds – we were working with Draper Esprit and 83North. They’ve been believers in the business from very early on, and that’s important to me. Then the strategic investors, obviously, they’re buying our product. I think that’s probably the best endorsement you can get for your strategy that they are willing to enter into five or ten-year contracts for the provision of core technology to the bank. So that’s a massive endorsement for our technology, and also the trust that they place in the company. That is a very important thing for me that they become part of the team. I look at this as really a team exercise; the board, the strategic advisory board, the investors, and staff. They all need to pull in the same direction. So to have investors who believe in what you’re doing and are willing to back it, either through those commercial contracts or the investment that they make in the business is really important to me. Alejandro: Absolutely. In this case, there’s a lot going on around fintech, a lot going on around payments. Where do you think that your space is heading as a whole? Michael Mueller: I think, for me, the whole notion of fintech as a sector is a bit of a difficult one, to be honest. I would not even necessarily think that we are a fintech company because we’re not a regulated financial service provider. So I think we’re lacking the fin in that, so we’re a tech company. Alejandro: Okay. Michael Mueller: We’re basically providing high-end technology to regulated financial institutions, which is not exactly new. So, banks have always bought technology, and they’ve always tried to buy the best technology. From my perspective, I think we are in a very interesting space, where, on the one hand, we’re using cutting-edge technology, all the very latest tools, fully cloud-native infrastructure, hybrid cloud, and multi-cloud deployments, APIs, [28:30], and all these wonderful things. On the other hand, we’re able to deliver that to very large organizations who are a lot more used to buying on-premise technology and licensed-based products that they can fully control. I think we have a team in Form3 that is able to get us through those vendor onboarding processes, security reviews, assurance processes, testing, and everything that the very large banks would actually do to ensure that we are safe on the one hand, but we’re doing this by using 21st Century technology. That is a very exciting prospect for me because that is exactly what the industry needs, so better technology across all banks to provide better end-customer outcomes. Whether you call that fintech or just technology, I’m not so sure. I would probably always describe us as a technology provider as opposed to a fintech company. Alejandro: Understood. Michael, for the folks that are right now tuning in to get an understanding of the size of Form3, is there anything that you can share around perhaps the number of employees or anything else in terms of numbers? Michael Mueller: We are about 180 people in the company; about half of those are software engineers. We have a fair number of product managers and analysts, a sales team and ops team, a relatively small ops team actually, finance, HR, and a few other functions. We are in 14 countries, interesting. We have a fully remote model, so all of our staff can work from home 100%, all the time. We’ve had that from day one, which obviously positions us quite nicely, especially at this point in time. We didn’t have to make much of an adjustment to our operating model when COVID hit. We have an office in London. We have another office in Amsterdam. As I said, we’re hiring people, in particular, software developers in 14 countries in Europe, which gives us really good access to a much wider talent pool. We’re growing very fast, so we’re hiring between 10 and 15 people a month. We’re also looking at going into new territories and new geographies in 2021. So, at the moment, we are servicing customers in the UK and in Europe, and we’re getting ready for [stepping 31:36] me on that and also building connectivity to clearing settlement systems in other geographies. Alejandro: So to follow-up on this, Michael, you were touching on how fast you guys are onboarding people and the fact that everyone is remote, and that is the new normal that we’re living in. So what have you learned around effective remote work because, for you, you were used to the banking old days, which is, everyone is in an office. I’m sure that this, for you, has been also an adjustment, and just wondering what has been that lesson for you around this; and I think that it could also be very inspiring and very telling for some of the folks that are listening right now and figuring things out around remote work. Michael Mueller: What we realized very early on is remote working is a lot more than just telling people to stay at home and use Zoom. You need to build a culture around remote working. And, to be honest, it’s actually easier if everybody is remote, as opposed to just some people being remote and the rest of the team in the office. You need to build a culture around engineering. We do a lot of air-programming, which we’ve done from day one. You need to put in place an operating model that ensures that there’s a good communication flow. You need to put in effort to also build and maintain company culture, which required, again, a lot of communication and a lot of creativity around getting everyone involved in the company to ensure people are not just switching off or not bringing themselves and their creativity into the company. It requires effort, and it requires effort to sustain it. I think many of the companies, and we’re talking to a lot of them because they like what we’re doing and they want to learn from it. So, I think many in the business who haven’t had that are probably now getting to a point where the initial excitement of everybody working from home is kind of gone, and it’s a lot harder now to sustain it, to sustain the momentum. You need to have onboarding procedures that are fit for purpose. And to be fair, that was a bit of a change for us because even though we’re fully remote, we used to bring in people when they started with the company for the first week or so to meet other people, get to know colleagues and stuff, and we can’t do this right now. So we have that strange situation where a good number of people in the company have actually never met anyone else from the company in person. That means we really need to keep the communication going. You need to organize events. As we speak, the team would be on virtual, first in our [34:41], quizzes, townhalls. We have a standing all-hands meeting every Monday morning where we talk about all aspects of the business. Yeah, you do need to put the effort into basically keep everyone involved. Alejandro: One of the questions, Michael, that I typically ask the folks that come on the show is if you had the opportunity to go in a time machine and go back to perhaps 2016 when Form3 was about to launch, and you had the opportunity to have a chat with your younger self, with that younger Michael that was thinking about launching something, what would be that one piece of business advice that you would give to your younger self before launching a business, and why knowing what you know now? Michael Mueller: The obvious one is, I would have avoided that pivot that I was talking about earlier, and I would have invested a lot more time and effort in building IP and building an engineering team much earlier in the journey. So, I think in hindsight, it was required for us to go through that phase because it gave us a really good overview of where the market was. But knowing that now, I would probably tell my younger self to get on with it and just build interesting and exciting technologies all in the engineering, and it’s all in building an operating model around that that is best in class. I think that we could have avoided wasting a bit of time by using other people’s technology, and we should have built it from scratch ourselves from day one. That’s probably the biggest learning on the way. Alejandro: Amazing. So, Michael, for the folks that are listening, what is the best way for them to reach out and say hi? Michael Mueller: I’m on LinkedIn, as most people. We do have a website, of course: www.form3.tech. I look forward to talking to as many of you as possible. We do hire a lot of people, so if you’re interested in any of our open positions, please reach out. If you happen to work for a regulated financial institution and if you were in the market for a new payments system, please do reach out as well. And if you just want to have a chat about cloud-native technology, we’re very happy to do that as well. Alejandro: Amazing. Well, Michael, thank you so much for being on the DealMakers show today. Michael Mueller: Thank you for having me. * * * If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at email@example.com.
38 minutes | 21 days ago
Lance Hill On Raising $100 Million To Foster Meaningful Discussions In Health Care
Lance Hill’s health tech startup is one of those few companies that appears to have had the incredibly fortunate of enjoying a huge surge in demand thanks to the recent disruptions brought on by the coronavirus and how it has accelerated the use of technology, new needs and hiring changes. His company, Within3 has acquired $100M financing from top-tier investors like Silversmith Capital Partners, Insight Partners, Drummond Road Capital, and Easton Capital. In this episode you will learn: Choosing the best growth financing partner How Within3 has been hiring and expanding during COVID Lance’s top advice for new entrepreneurs SUBSCRIBE ON: For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here). Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below. About Lance Hill: Lance Hill joined Within3 as Chief Executive Officer in 2007. Prior to joining the Within3, Lance Hill served as Vice President and General Manager of webMethods’ worldwide Service Oriented Architecture software business. Publicly traded on the NASDAQ until its successful sale to Software AG in 2007, webMethods was a global player in the enterprise software market with total annual revenues exceeding $200 million. Before joining webMethods, Lance Hill served as the Vice President of Enterprise Engineering and later founded the Fusion Technology Group at National City Corporation – a super regional banking firm with over $140 billion in assets under management. In this capacity, he spearheaded the creation of an internal, end-to-end solution delivery and support organization with responsibilities for business integration, application development, workflow, imaging, business intelligence, and portal technologies. Lance Hill began his career as an e-Business consultant with IBM Global Services where he served in a number of strategic and consultative roles, including team lead for e-business architecture for the mid-western United States. At IBM, Lance Hill advised key Fortune 500 clients on technology strategy and developed training, methodology and best practices for IBM consulting teams. Connect with Lance Hill: Linkedin Crunchbase Twitter * * * FULL TRANSCRIPTION OF THE INTERVIEW: Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a really interesting founder. We’re definitely going to be talking a lot about pivots, about having an office in a risky place, about growth rounds, and you name it. And I don’t want to make our guest wait any longer, so without further ado, Lance Hill, welcome to the show. Lance Hill: Hi. How are you? Glad to be here. Alejandro: Born in Massachusetts in a small rural town, so how was life growing up there? Lance Hill: Life was very, very quiet. I have an older brother, myself, and my parents. We are African American, a small town in Massachusetts – we were the only African American family in our little town and grew up with not a lot of money, to put it lightly. So, it was definitely a quiet experience. It was a safe experience, but it definitely taught me the value of trying to strive for greater than where you’ve come from. Alejandro: Any lessons there, Lance? Obviously, I’m from Spain, and coming here to the U.S. was quite a challenge. You mentioned to me that you and your brothers were the only ones there, so there was not a lot of diversity. I’m wondering if there were any lessons or anything that was there for you to really capture. Lance Hill: You know, I think the thing that I learned growing up was accountability for myself. It was nice in a way that it was a very small rural upbringing, and so you really did know everyone. But on the flip side, it was certainly a bit of an isolating feeling when there are not people like you around. So, I think what I learned from a young age is self-reliance from that experience. And also, again, really growing up pretty poor, pretty much on welfare for the first part of my life. The value of rolling up your sleeves and getting things done yourself knowing that no one’s going to come help you – that was the big thing that I learned. I took that into the rest of my life. Alejandro: Do you think that to a certain degree desensitized your being with uncertainty, which is a big deal as an entrepreneur? Lance Hill: I think what it maybe gave me, in a way, was a false sense of confidence in that I feel like I can do anything if I put my mind to it, and I kind of have to because no one else is going to help me do it. So I think that’s the big lesson that I took away from my upbringing. Alejandro: And in terms of your love for computers, how did you come across this love and start developing this skill set around it? Lance Hill: Yeah. That’s a great question. Actually, as I got older, my mother started going to night school and got a degree and basically became a database administrator. But through that, she would take me to the computer lab, and I would sit in the back of the computer lab while she was at school, and I got sensitized to computers then. Ultimately, I got myself a home computer, an old one, and was able to start programming. I just loved the feeling of being able to build things on my own and write them and figure them out. This was in the ‘80s, so computers were quite different. That’s what got me going. The thing that I really loved about the whole technology space and still do to this day is it fits a lot that I said earlier, which is, it’s all about who you are, what you know, what you can do. It’s not necessarily about what letters come after your name from a degree point of view or where your pedigree is. I think technology, generally, is a really great industry for meritocracy. That appealed to me as well that I could basically create anything I wanted to with a computer if I was just smart enough to figure out how. Alejandro: How did you end up in Ohio? Lance Hill: I went to school in Ohio for computer engineering. At the time, the rest of my family all went to school in Massachusetts. My older brother went to a state school in Massachusetts, ultimately. I was going to do that, as well, but I got a scholarship to a university in Toledo, Ohio, to study computer engineering. So, I went to do that and moved up here. This was in the early 90s, so this was a time when the dotcom boom hadn’t really hit yet, but it was still a big, kind of, ramp happening with technology. At the time, the two big cool tech companies were IBM and Microsoft – version one of Microsoft, the MS-DOS part of Microsoft, and early versions of Windows. While at school, I got recruited to join IBM, out of Detroit, and I did that. So, I actually never finished my college degree. I left school. It’s kind of cool to hear about that now with some of the great tech founders – they’ll leave school to start their companies or whatever. I kind of did it in a weird opposite way. I left school to go join a big company and joined IBM. This was when IBM was really transforming itself into a services organization from a legacy hardware company, and they were really, really trying to get smart talent wherever they could. So, I joined IBM in the global services division, which was nascent, at the time, out of Detroit. I think when I joined, there were maybe 40 people in my whole region that did services. When I left five years later, there were 800 to give you a sense of the scale of that. That got me exposure to large companies. What I was doing at IBM was Fortune 500 consulting, where I would go into organizations. This was the early days of the internet, so I was designing internet environments for companies, designing firewalls and security systems, building some of the first online banking networks, and things like that. I remember at that time in my career, it was interesting. First, I was very young, and I kind of have a babyface, and I remember I would always try to wear a thick goatee or a beard so I would look older because I was a consultant billing hundreds of dollars an hour going into people who were older than my parents and trying to tell them what they should do. So, I always thought I needed to try to look as old as I could. Now, of course, I wish I could look younger than I could. But, I was traveling five days a week, six days a week, most weeks, traveling all around to different organizations. I actually got to the point where I considered not even having a house or an apartment, just having a P.O. box for my mail on the weekends because I would fly back from wherever I was, late Friday night, early Saturday morning. Saturday morning, I would drop off my dry cleaning from the week before, pick it up, have one night, and then on Sunday be getting ready to travel out again. So for about four-and-a-half or five years, I was really a road-warrior, and I view that more as my college, if that makes sense, in that I was able to see a lot of different organizations and different industries, healthcare, fintech, finance, government agencies, and things like that, and see how technology could impact their businesses and what they were doing, and how technology even impacted management style and management function as well through process point of view. The cool thing about that job is that I got to reinvent myself every few months when we’d go to the next contractor and implement the next big system. You could start over and take your lessons learned, take the things that didn’t work and leave them behind, and then go forward. That’s something I’ve certainly taken into my entrepreneurial life where things haven’t always gone like I hoped they would, but being able to reset yourself and drive forward with what you’ve learned. Alejandro: Is there anything there, Lance, perhaps while you were working with all these different companies, patterns that you were able to see from the companies that executed well, from the companies that didn’t? Lance Hill: Yes. You know, I think companies that did a poor job at that time were companies that got enamored with the technology and lost sight of why they were trying to do it. There was certainly this idea that companies were trying to “modernize” and implement the next cool technology or the next cool fad. Those companies ended up invariably spending and wasting a lot of money and not usually making a lot of change. So, I think what I learned there a little bit is kind of the idea of waste. I remember one time at that point of my career sitting – one of our clients at the time was a school district, and this was during the Al Gore, No Child Left Behind Act, I think it was, where schools could apply to the government for $1,000 or $2,000 per student if they lived in an impoverished neighborhood to purchase technology to connect them to the internet, to try to lower the internet divide. I was working at IBM and consulting for a large school district, and they were going to apply for these funds. And they certainly felt political pressure to apply for all the funds, but they were only allowed to use the funds for the actual infrastructure network and hardware. I remember sitting in a room at that point in my formative years with folks around the table saying, “We have to figure out how to spend 70 million dollars, or whatever it was, of internet technology hardware because we have to apply for all of it because if we don’t apply for all of it, we’ll be on the front page” saying the school didn’t get all the money that was available to them. Yet, they couldn’t actually spend the money on curriculum or anything useful. So we were trying to brainstorm. They were looking at putting in Fortune 500-class servers and network infrastructure that ultimately would not be used very well, and they were doing it more from a technology-first point of view than thinking about it from what the actual impact would be. That’s an example of what not to do. I saw similar things in for-profit environments, as well, where the budget and a high-level plan drove a technology implementation or a technology thought process versus thinking about the business that we’re trying to do and what we’re trying to accomplish. What I fell in love with that part of my career was on the successful side in seeing how technology can really transform businesses when it’s aligned properly, when the goals are set up correctly, and that’s really, really fun, and it’s neat; the turnaround time on it is very fast, relatively speaking to have other industries. I really enjoyed that part when there was alignment, coming in, re-engineering processes, putting technology underneath that, and seeing business functioning tremendously better on the way out. Alejandro: Got it. After this experience, webMethods was the segue into starting your business. I think that with webMethods, also, you were able to see the full cycle of a company because you were there when the acquisition happened. Tell us about this experience, and then, also, how did you come across the idea of Within3, and how did you go about bringing it to life? Lance Hill: Yeah. A couple of stops after IBM was webMethods, and it was my progression, both from a large company to a smaller. IBM had 100,000+ employees when I joined. webMethods had about 2,000. In the middle, I worked with a Top 10 bank that had about 35,000 employees and ran a big part of the IT organization there. So my clear path was always toward smaller and smaller companies because I like the turnaround time so much better and the impact. When I joined webMethods, it had become very clear to me that continuing that theme of technology making an impact on business, what I really want to be involved in is the business side of technology. I want to be running a software business or a technology business, and webMethods was a great place for me to learn that part of it. It was a publicly-traded company with about 200 million dollars in revenue at the time and a global organization with a global footprint – a really great experience with me learning the business of software more than just where I started, which was just the technology side of it. Those lessons that I learned there, being involved in a global software organization all the way through. Ultimately, we sold the business to Software AG that I took with me when starting Within3. Alejandro: Tell us about the early days of Within3 because the business that you guys started is not the business that we know today. Lance Hill: No, it’s not. It’s interesting. It’s really funny when you think about starting a company literally from scratch and the process that you go through. I think at the time, a lot of entrepreneurs, you read things, and you think, “Oh. I’m going to start a company, and four years from now, I’ll be on the cover of Wire Magazine, smoking a cigar, celebrating my vast success.” I think I had a little bit of that in my head that it was that easy. But what we were doing at the time was, a few others and I were thinking about how we can improve communication and healthcare, and thinking about it from a technology focus point of view. When I was at webMethods and finishing that part of my journey, social media technology was coming into its own, so this was in the 2006, ’07 timeframe. I remember that the largest social media company in the world at that time was Myspace, which was #1. Facebook was coming on strong. They were #2 and coming. I remember LinkedIn was this business social media thing that was interesting, but no one quite knew what to make of it at that time. The prevailing wisdom at the time was that either Facebook or Myspace would win the social media war for consumer social media. And, obviously, Facebook eventually won out. But the thought process was that what would happen next, there would be a Facebook for lawyers, a Facebook for accountants, and a Facebook for doctors, so different professional constituencies. There’d be a predominant social network for each of those. There was a lot of money being poured into that idea. What we were looking at and thinking about was, could we use social media technology to improve communication in healthcare? Can we make it so that if a doctor needs to refer a patient to a specialist that they can find that specialist easier, faster, and better? Can we make it so that if there’s a difficult case that doctors can connect with each other and talk about that case better and faster? Can we make it so that they can do it between institutions? Because, at the time, and it still exists today, you may have two doctors in the same city, but if they work for two different health systems, they may have very limited interaction, and ultimately, that’s bad for patients. So, we were thinking about creating, in essence, a social network for doctors was the original idea of Within3. When we started that, we did it purely bootstrapped, purely angel-backed. There were four or five other companies that were in the same time horizon that were also approaching that problem from different points. All of those companies are tombstones now. They’re all gone. But the idea was that whoever got to “critical mass” first would win. We began a journey trying to build that, trying to take social media technology and apply it to healthcare, and more specifically, try to build a physician network in the late 2000s. Ultimately, that business model was not successful. We saw that coming. We founded Within3, Inc., right at the end of 2018. We worked at it. We built the platform. We started getting users and so forth. But by the time we started getting to 2011, ’12, it was clear that the business model wasn’t going to work, so we had to make the pivot. It was one of those life-and-death experiences where to continue going like we were, we were going to go out of business. We had to make the switch, and we had to approach the market differently. Alejandro: So what ended up being the business model that we know of Within3 today? Lance Hill: At the end of 2012, we recapped the business. We contacted all of our shareholders, which were angels, and we said, “We need to do something different.” They retained their trust in me for the most part. I think we had over 80% participation in the recap. What we did, instead, is we said, “The initial idea is correct in that in healthcare, there are still such laws to communication, and even when you look at where we are today with the COVID vaccine and everything else, there still are so many inherent walls to communication. What we did, though, is we said, “Part of the issue was if you are trying to build a network on your own, you need users, you need content, and you need money. Those were three things that were difficult for us to get being capitalized the say that we were. But if we could actually approach it on a B2B SaaS basis, so if we could go to organizations that have constituents and help them solve their communication problems, we could maybe make more of a difference. So, we rebuilt and relaunched Within3 in 2013 as a B2B SaaS company that was focused on working in the life sciences market. We found that over that previous four years that one of the really large places where communication problems hurt everything, time, money, cost, and ultimately lives, in drug development. And that if we could take what we had learned generally and apply it specifically to the communication challenges and drug development, we could help life science companies bring products and therapies through research and into the marketplace faster. We pivoted away from the network-based approach, and instead, said, “We’re going to call on companies individually and show them how we think our technology can help them” do what I just said. We started rebuilding our products for that purpose and then one client at a time, working through and convincing them that there’s a better way to communicate with physicians when you’re developing a drug than eight-hour-long meetings at a hotel in Dallas, as an example. Alejandro: Absolutely. So then, in this case, obviously, a company like this requires some cash, some capital. So how much capital have you guys raised to date? Lance Hill: When we did the recaps, we had raised some money before the recap. That was basically all gone, and we raised 2.5 million dollars at the end of 2012 from our existing angel backers, and then some other angels, as well, that came in, and that’s it. We took that and then ran a business. What was interesting is, because we had no capital, I call it our drive-farming stage. We had to be extraordinarily cash-efficient, so we built the business out of cashflow. Every single headcount that we decided to hire and not hire was, to some degree, an existential decision because we didn’t have any sort of buffer to be wrong. We very methodically built a profitable and cashflow positive business over those first years and kept everything. We didn’t have the luxury of doing a big growth round and then spending ahead of where our business was, aiming at a future target. We had to get a very solid, fundamental business built in those first few years when we weren’t even at scale yet in order to survive in the way that we were. So that was the first challenge. Ultimately, obviously, we succeeded. Alejandro: The last growth round that you guys did was literally 90 days. So, can you tell us about this? Lance Hill: Yeah. That was over the summer, so fast forward to 2013, starting the company and focusing on how we can help life science companies communicate virtually. We figured it out. From 2013 to 2017, we were gaining initial clients. We were targeting the largest of the large pharmaceutical companies in the world, as an example, and bringing them on board and continuing to serve them as well as we could, and build our solution. Then by 2017 or so, we really had it figured out from a product and a business model point of view. In 2017 is when we started scaling organically. Our actual growth rate began to double year over year from 2017 forward. Before that, we were growing modestly, but much more in an incremental basis. From 2017 forward our product set had expanded. We were able to help our clients do all sorts of virtual work. We were growing. We hired our European team in 2019 and were growing broadly. Then, going into this year, in Q1, we were already growing at triple digits, and then COVID happened. I think for a lot of companies, there’s this “And then COVID happened” sort of phrase, and then what comes after that is either really disastrous for the business or not. For us, we were a company who had spent the last eight years building a business around virtual work and how to do work virtually. When COVID happened, our rate of growth was already extraordinarily high, but like what happened to Zoom toward mid to the end of March, leads for Within3 spiked in our industry because folks went from pursuing alternative ways of communicating as the right thing to do to pursuing it as a must-do because everything live had been canceled. So we looked at a world that said, “Wow! COVID has accelerated our marketplace forward for virtual work and virtual engagement for a number of years. We were already high-growth, high-scale, so we said, “What we need to do at this point is raise a growth round.” The demands on the company in the marketplace were high. We didn’t want to be in a position anymore. We were trying to fund everything out of cashflow. We wanted to step on the gas with product innovation. We wanted to be able to expand globally. So we began a growth round. For us, it was a bit different. Our demand for utilization Within3 just spiked again, very similar to what you read about Zoom. We spent Q2 – we had already hired aggressively in Q1 because we were already growing so quickly. We expanded our hiring in Q2 and then entered a growth round. When we did that, one of the things that was important to me is that we not screw up the business. We were already a profitable cashflow-positive business. You never know when you start a round what you’re going to get and if you’re going to end up being able to accomplish what you hope. What I didn’t want to do is start the process for a growth round and then damage the business because my eye is off the ball and diligence is hard, and you spend so much time going through it that we end up coming out of it deciding not to do a round, but having damaged or delayed the business in the meantime. So we set a goal that we would go out and explore the market and see what the appetite was because we had been heads down for so long, I don’t think we knew what the market value with Within3 would be. But if we were going to do it, the choice was to get it all done before Q4 because, for us, we’re a little bit of a seasonal business, and Q4 is a really important quarter for us. That meant that we had to get the entire process done. We started in May formally and began a formal process at the end of May and started talking with leading SaaS private equity companies and had a closing round within 90 days in the middle of COVID, which is obviously still going on over this past summer. So it was a very intense all-day, all-night, seven day a week sort of experience for most folks in Within3 since about March 15th when travel restriction started all the way to current day. Alejandro: In this sense, how much did you guys end up raising, Lance? Lance Hill: We raised over 100 million dollars of growth capital. We ended up partnering with Insight Partners, who we liked very much. We talked to a number of firms through that process. One of the things for us that was really important is because we are a founder-started, founder-led business, most of the folks in our company up until maybe early this year had been with the company for a while, had taken it from very small to what it was. The next size of scale for us was pretty extreme, and we wanted to make sure that we had access to a firm that not only had deep pockets and capital and a tremendous track record in growing scale-up companies successfully, but we also wanted a firm that had some operational expertise on staff that could talk to us about scaling our go-to-market and scaling our client success team and scaling our product groups and implementing systems underneath those and dealing in a global environment like we deal with in our business versus a firm that maybe had capital and had a rolodex of people you could talk to, but didn’t necessarily have direct access to that operational support. We really need that because we started our headcount this year over the course of this year’s tripling, and we’ll continue to have high growth of headcount going forward. So we needed to the point of absolute highest volume for the company, already start implementing processes to scale for Q1 in the coming year. So we thought Insight brought a lot of capability there for us, and we were able to do the deal quickly, which was really important to me. I did not want to be in a position where it’s October, it’s November, and we’re still haggling over term sheets of diligence items or what have you, and the deal’s dragging on and on and on, and my eye’s not on the business. They were able to move quickly with us, which was tremendous. Alejandro: Ninety days is like no time, so that’s really fantastic, Lance. One thing I wanted to ask you is, especially for the folks that are listening to us now, to get a sense of the size of Within3, is there anything that you can share in terms of maybe numbers of employees or anything? Lance Hill: Yes. We’re about 140 employees currently. We started the year with just over 45 employees, and we’re still adding pretty much in every single department. From a headcount-wise, that’s where we were. At this point, we have staff in [32:40], Latin America, Europe, Asia, and we are deployed globally, which brings its own interesting set of challenges. It’s been fun and interesting integrating different cultures in different places in the world into the company and doing all of that during COVID when you can’t go see people and meet people. It’s interesting, as a founder-led company – when you’re smaller, you tend to know everyone. You either interviewed them yourself, or you’ve met them very quickly along the way. We went from that feeling – at least I did, from feeling like I could look at everyone on a company call and know them all by name and face to we’re hiring people every single week that you’ve never met. That’s an interesting feeling as well. It’s been different. I think hiring in the COVID era where you’re literally hiring someone off of a Zoom screen with very limited physical interaction with them has been challenging. I know it has been for a lot of companies. Luckily for us, we’re just natively remote anyway. We didn’t have a lot of process change, and that sort of thing to do when COVID affected the world with travel restrictions. But it still is a little bit surreal seeing the headcount of the company grow the way it is at the speed it is. Alejandro: Here, we’re talking about you being at it since 2008 in Within3. It’s been a wild ride, to say the least, Lance. One of the questions that I ask the folks that come on the show is if you had the opportunity to go back in time – imagine you get into this time machine, and you go back to 2008, that moment when you were thinking about starting your own thing and going at it, what would be that one piece of advice that you would give to yourself before launching a business and why given what you know now, Lance? Lance Hill: The first thing to come to mind is, pay attention. What I mean by that is, when you’re starting a business, it requires such faith that you’re going to be successful, to take the risk to start a business anyway, especially if you’re doing it with your own money and those of your family and friends that it can blind you to the potential flaws in what you’re doing or make you not notice where you’re actually wrong. I know there’s a school of thought that says, “I have a vision, and my vision is right, and I’m going to pursue my vision no matter what, and the world will get where I am because I know I’m right.” I don’t subscribe to that. I think you have a vision, and then the market kind of smacks you in the face and tells you if your vision is right or wrong or if your vision needs to be modified and implemented differently. I think in the early days, I was so overconfident that what we were doing was so great and innovative and I had been decently successful in my career that it was just destiny almost that we were going to become an amazing company. And it wasn’t until things started to go wrong – it was like a lightbulb went off. So my advice to myself, going back, would be just that: believe you’re going to be successful, but be very paranoid that you’re missing something, and uncover what that is. Especially when you’re a small company, it’s easy to have fatal mistakes. We had in our early days, one company that purchased a lot from us one year, and we thought, “This is it. We’re going to replicate what that company did, and we’ve arrived.” It turned out that was a false positive. So we drunk our own Kool-Aid with not a good amount of real market data and built the company in the wrong direction and ultimately had to reset. Alejandro: Wow. Very profound, Lance. For the folks that are listening, what is the best way for them to reach out and say hi? Lance Hill: You can get me via email: firstname.lastname@example.org or via our website: www.within3.com. You can contact us there. Alejandro: Amazing. Well, Lance, thank you so much for being on the DealMakers show today. Lance Hill: Thank you so much for having me. * * * If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at email@example.com.
32 minutes | 24 days ago
Martin Lindman On Raising $100 Million To Give You Access To Fast And Accurate Health Care
Martin Lindman is the co-founder of Doktor and has undertaken an exciting journey of jumping into different industries to apply his skills, competitive spirit, and eagerness to take on a challenge. Doktor has recently raised close to $100M from top-tier investors like Bonnier Ventures, Carnegie, Handelsbanken, and Webrock Ventures. In this episode you will learn: How Doktor raised almost $100M without VC money The impact of COVID on the digitization of healthcare Martin’s top advice for his younger entrepreneurial self SUBSCRIBE ON: For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here). Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below. About Martin Lindman: Martin Lindman is the founder and CEO of the hugely successful healthcare platform Doktor.se – the third-largest digital healthcare provider in Europe and the fastest growing app. He has a successful background as a sports player in the Swedish national ice hockey team, a finance role in banking, and over ten years as founder and CEO of five private primary care clinics in Sweden. Doktorse Nordic AB currently manages both physical and digital care facilities. About 700 people work for Doktor.se. Our digital and physical healthcare centres employ nurses, specialist nurses, general practitioners, specialist doctors, psychologists, counsellors, physiotherapists, dieticians and rehabilitation coordinators. The company has operations in Stockholm, Uppsala, Sörmland, Skåne, Västernorrland and Västa Götaland. Connect with Martin Lindman: Linkedin Crunchbase * * * FULL TRANSCRIPTION OF THE INTERVIEW: Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a great guest. I think that on the episode we’re having today, we’re going to be learning a lot about jumping from one thing to another and developing an expertise, a skillset, a desire and interest, and taking it to the next level in different ways and different flavors. So without further ado, let’s welcome our guest today. Martin Lindman, welcome to the show. Martin Lindman: Thank you so much. It’s a pleasure to be here. Alejandro: So born in Sweden, right outside of Stockholm. How was life growing up there? Martin Lindman: I think it was good. Sweden is a great country to grow up in, and there are great opportunities to do. I spent most of my time as a young person and individual doing sports, basically. That was my whole childhood. Alejandro: And this was tennis and hockey, so how did you get so competitive so early on? Martin Lindman: I don’t know. It was very early on. I started ice skating when I was three years old, which even in Sweden is fairly young. Then I started tennis when I was six years old. I did multiple sports, and it was natural to me, and that’s what I wanted to do. I was very competitive very early on. Alejandro: So, in this case, you continued, and you really took it seriously. In fact, you went to university, and you were still playing hockey and ended up becoming a professional hockey player. So, tell us about this. Martin Lindman: Yeah. That’s true. I did play all the way up. I played tennis on a serious level as a junior. In Sweden, I was among the lead as a junior, but hockey was always the sport where I felt like I could really compete and where I felt was my strong suit. But it didn’t really take off, so I thought I always wanted to study, so I went to Uppsala University. Right around my university study, I became a professional. I turned pro. I was 20 when I turned professional, and my first year, I was 21. I got a contract playing in the German Professional League. Then the hockey after that just took off, and I had 12 amazing years playing outside Sweden and played in the League for Sweden for quite a few years. I also got the privilege to play for the Swedish National Team for two years and, all-in-all, a fairly decent ice hockey career. Alejandro: Here, you definitely took your competitive spirit to the next level. I’m wondering how that competitive spirit also has shaped you as an entrepreneur too? Martin Lindman: I think it’s my core. It’s the essence of me. A lot of people talk about being competitive. Competitive, to me, doesn’t mean I get really mad when I’m losing. That’s not the essence of what I see being a competitor. For me, it’s all about the ambition of striving further. I can understand I’m taking a loss or things aren’t going my way, and it’s all about understanding that I don’t want to sit still. I keep wanting to move on; I keep wanting to build. I want to challenge myself; I want to challenge my surroundings. I want the surroundings to really dig down and challenge me and taking the opportunities that are out there. That’s what I feel is being competitive. I think that’s my core. Alejandro: In your case, the hockey journey definitely was very extensive. We’re talking about 12 years going back and forth from Germany to Sweden, and Sweden back to Germany, and then, obviously, Germany back to Sweden. Then after the 12 years, you find yourself – hockey’s over, so what’s next? How did you go through that transition to really identify what kind of life you wanted to carve out for yourself? Martin Lindman: It wasn’t that the hockey just abruptly came to a halt, or I ended my career. It was more in the sense that I felt like I came to the end of how I could challenge myself. I knew I was too old to progress to playing in the NHL, the National Hockey League. I played in Italy; I played in Europe; I played on the national team. I felt that I needed to do something else. I was only 32 years old at the time. There were no injuries. I could keep playing, but I felt like I wanted to come back to school; I wanted to educate myself; I wanted to do something else. Then, I played in Sweden for the team here in Stockholm called Djurgårdens. I got the opportunity to study at Stockholm Business School. I did that for a while, and then from there, I got the opportunity right off to start working for a bank here in Stockholm. I thought that was interesting due to the fact that I wanted to understand the financial aspects; I wanted to understand the banking industry. But I only stayed there for a year because I felt like I wanted to do something myself. I still had that drive. It wasn’t so much that I wanted to go into employment. I kept wanting to push myself. Then, after only a year, I had the opportunity together with my dad. Once they changed the system of Swedish healthcare, and for the first time in Sweden, there was the ability to launch private care units like clinics. My dad and I set that up, and we started working on it. He has a long history within Swedish healthcare, so for him, it was very natural. For me, it was more of a challenge to set up the infrastructure around that company and try, together with him, to scale it. We did that for a couple of years together. Then, my dad retired. He’s older and wanted to slow down. I kept doing it. It turned out that I scaled up to five clinics around Sweden and got a fairly good idea of how we are executing and driving primary care. In the beginning, I had no experience. I was brought up in a family with a long history of Swedish healthcare, but for me, as an individual, it was all about the learning experience in the beginning, and it was exciting. It was exciting to begin to feel that I was a little bit out of place. I needed to be humble to understand that with people that have obviously been in this environment and working in this industry for their entire lives, are educated, smart people, I found myself in the opportunity to scale a company. We did a couple of good things; we did a couple of bad things, but all over, we learned a lot about how healthcare is run and how people are consuming healthcare. Alejandro: In this case, how did you guys go about it because you went from one to five, and I assume that there was a lot of cost involved. How did you guys capitalize the operation? How did you finance it? Martin Lindman: That’s exactly – that’s the truth. It’s two almost separate environments. One is the healthcare industry because that’s what we work in. That’s the industry we work in, but it’s equally an industry to understand how to scale a company, how to recruit and attract capital, how you scale your business. What’s your angle? What’s your value proposition to the market. – all those things. At the end of it, it was a crash course to understand what to do or not to do. As I said, I learned a tremendous amount on both those sites. Alejandro: In this case, once your father retired, you scaled this up to five clinics, and then you ended up selling four clinics, four of the five. So, why did you sell four out of the five and not all the five? Then also, why, in the first place, did you decide to sell? Martin Lindman: As I said, we did a couple of good things, and we did a couple of bad things. What I learned with the physical care units was that it was very difficult to scale. I didn’t have the financial backings of scaling them the way I wanted to scale them. I also learned that there were no real synergies between physical care units. I had one clinic that worked really well, and I had another one that didn’t work so well. There was very little synergy between the two of them and very little interaction. At the end of the day, I felt like we needed to move on. I had this one clinic that was fairly young that was in the city center of Upsala in Chanikin. I felt, “Let’s keep that one,” and we sold the other four and just basically tried to look at the next venture of what we wanted to do. I still felt like I wanted to be in healthcare, but I didn’t want to scale physical units the way I had thought I wanted in the beginning. It turned out that it was a fairly smart move to do that way. Alejandro: In this case, you started having some discussions, and some of those discussions ended up really being the segue for your next business, which would be Doktor.se. Tell us about those discussions and how you essentially ended up bringing this new idea to life. Martin Lindman: Yeah. I sold it, and ,driving five clinics down to one and having an organizational operation that was fairly self-sufficient felt like from one day to another, I had a lot of time on my hands. I spoke to one of my friends. We talked a little bit about the next venture and what would be interesting to do. He told me that he had a friend that I didn’t know that was interested in healthcare in the states. He didn’t have any knowledge, and he didn’t work within the space but had some other interesting backgrounds that could be applicable to healthcare. He wanted us to meet, and that’s what we did. That’s Svante Tegnér, my co-founder at Doktor.se. We started out with a luncheon, and he went straight to it and said that he was very early-on with retail – started a clothing company here in Sweden – all the way back when people thought he was crazy. People thought no one would ever buy clothes online and get into the mailbox, and that was crazy, and that was just a crazy idea. And all the way up to as we know today what retail is. He sold his company, and I wanted to move into the next market that he felt was interesting. Everyone at the time here in Sweden (this is early 2016) talked about digital healthcare. There were two young companies on the market already, which were [13:26] and Doktor. We started talking about the digitalization of healthcare in general. We had four to five months of intense discussions about what we thought. I was very driven from the system side of healthcare and understanding that we need to create something that is of value to the entire ecosystem. Otherwise, why would we do it? And Svante, obviously, was very driven as a B2C entrepreneur, understanding that, at the end of the day, it’s the end-users that are going to download an app, use the app, and it’s all about the value proposition to that end-user that’s going to make or break your service or what you put out there. So, after four to five months, we finally came to “This is what we should do.” It was a pivotal moment in those discussions because they were not always eye-to-eye. More and more of the time, it was [14:24] of the way we looked at things. We had a pivotal moment within the discussion, and since then, that’s still been the hardcore DNA of Doktor.se. Svante and I, still today, are very much in line with what we think is the long-term vision for what we wanted to do and what’s going to happen. We felt like if we even scratched the surface of what we could do and the potential of this market. Alejandro: What ended up being the business model of Doktor? Martin Lindman: We figured out, and we scaled it back to look at the whole entire ecosystem and pinpointed three major key stakeholders in the ecosystem. We knew that we need to cater to all three of them because if we didn’t, we felt like we wouldn’t be able to scale. We will get stale very quickly. We looked at it from the system point of view and understood that healthcare is a little bit different than the retail because at the end of the day, yes, it’s the patients that are going to download this app, and they are going to use it, but in most countries and in most markets, it’s not the end-user that is paying for it. It’s either the government; it’s either the insurance company, or it’s a company that pays for their employees. We’ve seen some countries, and Sweden in particular, we see a little small co-pay that patients pay themselves. But other than that, it’s someone else that pays for the healthcare. We really needed to cater toward the healthcare industry, and that’s basically the essence of Doktor.se. Then, on top of things, we knew that we could come out with a strong value proposition to the patients. That’s something that we’re working on, that we’re still getting better and better at, and we’re really creating that brand name into the market. People feel secure in understanding that I can ask, and I can reach out to Doktor.se no matter what my healthcare-related issues are. Then the third component here, which is the clinical staff, understanding that yes, we’re a tech company, and we’re scaling on the solution of what we can create digitally. But, at the end of the day, it’s doctors, nurses, psychologists that are treating these patients. So, yeah. We’re creating a system that makes it easier with steering volumes. We’re creating functionalities, but it is people treating people. So, at the end of the day, it’s still a service that we’re providing, and we need to become the best company to track the best physicians. Alejandro: Obviously, for this company, you guys needed a little bit of money to scale things up. So how much capital have you guys raised to date for Doktor? Martin Lindman: I’m not 100% sure exactly what it boils down to. It’s right around 70 to 80 million euro. Alejandro: So, almost $100 million. You put in dollars, probably like around 90 or something. Martin Lindman: Somewhere along that – a little bit less. Yeah, I would say around there. Yeah. Alejandro: It’s interesting how in the U.S., if you were to compare to Europe, it’s not as easy in Europe to go past a Series A because the funds don’t have enough cash to continue supporting the companies as they mature and they go from financing cycle to financing cycle. I’m originally from Spain, and there, the largest fund is probably like $100 million. That’s pretty much it. So many of those companies end up needing to come to the U.S., and doing that jump on the Atlantic is not that easy. Martin, for you guys, in order to really raise this kind of money, being in Sweden, how was that journey for you guys? Martin Lindman: I do agree to some extent, but I think that a lot of things change, as well. We see a lot of capital being deployed in Europe, and it starts creating some huge funds even in Europe that could really cater to the journey that a lot of companies do. But that wasn’t the case for us because, from day one, we took a different approach to this market because we felt like, first of all, we weren’t first into the market. We had a different approach, but we were still in the same space, and we still did fairly much the same thing as the others but with a different twist toward it, and we scaled differently. We had a different tonality into the public eye, but it was in the same space. We started talking very early-on on sustainability and then unit economics and be aiming for the positive resolve and basing the company on what we’re performing, not scaling on VC funding and preferential structure and scaling the company on high valuation. Good or bad, that was the approach we took in the beginning, a little bit because, also, we didn’t have the opportunity to say that we were first out of the gate. We didn’t attract the high VC fundings in the beginning. So we did it on angel investors; we did it on private individuals in the beginning, but wealthy individuals that rode with us, in the beginning, all the way up to what we did just before the summer this year when we did our C round and raised 50 million euro. Even then, the majority of that investment was still individuals that had the pockets, family funds, and private individuals that became shareholders. We haven’t attracted industrial investors so far with Doctor.se. I think we’re a proven concept that it’s doable without structure in the company of getting into the hands of the professional industrial investors with preferential structures and so forth because we didn’t, at that time, feel comfortable on gambling on the valuation and leave it up to the investors to take us at that point. I think now, we’re past the stage of attracting that kind of capital, so it’s going to be interesting to see what the next step is going to be for us. Alejandro: Now, with COVID, it’s incredible how now on the covers of newspapers and magazines, you start to see doctors and nurses, which is not what people were used to really seeing. So I’m sure this has pushed the business and being at the right time in history. Martin Lindman: This is really terrible to say because the pandemic hit so hard on the society, and it affected so many people that it’s really difficult in that term to just jump into the discussion of how that affected our business positively. But in this conversation, obviously, I need to take that, and we need to have an understanding that that’s exactly what happened. If someone before the pandemic had told me to come up with a scenario that solidified or put Doktor.se in the full position of scaling, I wouldn’t have been able to come up with a pandemic because that’s how much that has done for the entire industry and what we’re doing. That’s spot-on to the functionality of meeting people in a different forum and being able to scale. Before the pandemic, a lot of my discussions within the market and scaling the company were all about the political risk. What happens if digital healthcare is not going to be a thing? Today, I don’t think that everyone ever thinks that we will not have digital healthcare within the next ten years. And it probably will increase. But that wasn’t the case before the pandemic. There were still a lot of discussions of – we saw a lot of European countries that weren’t even ready for digital healthcare. They didn’t have digital prescriptions. They didn’t have any fee structure for digital healthcare and so forth. So the change that we’ve seen over the last eight months is enormous in every way you look at it. Alejandro: For you guys, being able to ride that wave and being able to adjust things, and going with a really full-mode scale mentality, how do you adjust? How do you listen to the market and to your employees and your customers so that you get it right? Martin Lindman: I think that’s exactly what we did. I think we changed the mentality of what we did. As I said in the beginning, it was all about scaling a company. We wanted to be sustainable. We wanted it to be unit economic-wise. We looked at the financials differently than I think a lot of our peers did, and they were more scaling a tech company and talking about high valuation and what they would do in ten-years’ time. I think now when we’re in pull position here, and Europe, and one of the companies that scale in the quick is where the third-largest – it’s debatable if we’re the third or the second largest in Europe. We do have multiple-platform corporations in various different countries. We’re going to scale that more. We’re going to enter our own countries here in the next year. I think from now, the tonality in the company has changed dramatically, and it’s all now about, once again, competing. It feels like this huge market is changing right in front of our eyes, and we’re in the position where we’re financed. We have the full organization. We’ve treated 800,000 patients. We’ve done a lot of things that have put us in a position that if we cannot say that we’re going to win this race, who can say it? That’s the mentality that I tried to apply to the whole organization and lean forward to that it’s going to be a very, very interesting and enormously fun raise that we’re going to see in the next couple of years. Alejandro: Talking about the future, here, imagine that you go to bed tonight, Martin, and you wake up five years later, and you wake up in a world where the vision of Doktor.se is fully realized. What does that world look like? Martin Lindman: I think we’re going to be halfway there in five years’ time because I think that we’re going to do this for many, many, many years. I think five years from now, we’re going to be a solidified international company that’s going to be in multiple markets, countries, and we’re really going to have a presence noticed in so many different ways. We’re also going to see a lot of verticals being approached. What I mean with vertical is that we do talk a lot about digital healthcare, but at the end of the day, and I think in five years’ time from now, we’re not going to talk so much about online-offline solution. We’re going to, once again, talk about healthcare, and we’re going to have solutions out there that are going to be a variation of what you can do physically and what you can do digitally. I think that Doktor.se is going to be forefront from that development, and we’re going to be at the forefront of having our brand name positioning to the market where people know who we are, and they feel comfortable on “That’s the functionality that we want to use when we need healthcare.” Alejandro: That’s pretty amazing there, Martin. I think that you guys are definitely riding a wave that is very much needed. This is a typical question that I ask the guests that come on the show. Imagine if now we give you the opportunity to go into the time machine, and you go back, and you have the opportunity to have a chat with your younger self, with that younger Martin that is coming out of that switch from hockey into the business world and thinking about what’s next and perhaps what kind of company to start building. If you were able to have a chat with that younger Martin, knowing what you know now, what would be that one piece of business advice that you would give to yourself and why before launching a company? Martin Lindman: I would tell me – I know me as a person, and what’s good about me is what we talked about at the beginning. It’s my drive and my ambition to keep pushing myself. I don’t think I need to tell my younger self to do that higher or harder. I think it might be, to some extent, the opposite. I would tell my younger self to take a deep breath because sometimes we need to understand that even in diversity, that’s the best thing that could happen. All my diversities in the past, all those times where I was down on myself, and I think things didn’t go my way, and as being as competitive as I am and as I was, it was really difficult sometimes to just cope with that. That kind of stuns you, and that makes you a little paralyzed in the progressions. As I grow older, it almost triggers me when something hits me hard, and it’s a curveball, or it’s diversity, or something that comes out of the blue, or something that we see coming. I almost can start thinking that here’s an opportunity. I think that, obviously, takes a lot of falling down and getting up on your feet until you can say that. It’s not always applicable to me, even these days. But I’m much stronger in doing that than I was when I was younger. That’s what I would have told myself because then when I felt momentum quicker, I would have aimed higher because I think that’s key in what we need to do. I think we need to feel that we’re comfortable with raising the bar, not in the sense that if we’re raising the bar it’s going to be a failure if I’m not succeeding. Just raise the bar; try to aim for it, and if we don’t, just keep striving. Alejandro: Yeah. That’s very profound, Martin. I love it. For the folks that are listening, what is the best way for them to reach out and say hi? Martin Lindman: There are many ways. You can email me: firstname.lastname@example.org or LinkedIn is a good way to get in contact. It’s difficult to obviously answer everyone. As you imagine, it’s a lot of inbound coming, but I apologize in forehand to not be able to reply to everyone but reach out. Alejandro: Amazing. Well, Martin, thank you so much for being on the DealMakers show today. Martin Lindman: Perfect. It was my pleasure. Thank you so much. * * * If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at email@example.com.
27 minutes | 24 days ago
Niall Murphy On Raising $60 Million To Give Products A Digital Identity
Niall Murphy is the cofounder and CEO of EVRYTHNG which develops an IoT platform for consumer product brands, articulating data with real-time insights for billions of things. The company has raised $60 million from top tier investors such as Samsung Ventures, Cisco, Atomico, Cisco Investments, Dawn Capital, Sway Ventures, and The Future Fund to name a few. In this episode you will learn: How to handle being years ahead of your time and early to market The differences in starting up on different continents The real definition of being an entrepreneur SUBSCRIBE ON: For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here). Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below. About Niall Murphy: Niall Murphy is Founder & CEO of consumer product internet of things platform EVRYTHNG. A computer scientist by training, Niall Murphy is a technologist, serial-entrepreneur and angel investor. With 25 years of experience in innovation and future thinking, Niall Murphy has built pioneering businesses in internet infrastructure, mobile internet and web services. Prior to founding EVRYTHNG, Niall co-founded pan European WiFi network The Cloud, acquired by News Corporation’s BSkyB in 2011. In the mid 90s Niall Murphy founded one of the first internet service providers in Africa, later acquired by UUnet. Niall Murphy also co-founded scenario thinking consultancy The Digital Thinking Network. He has presented around the world, including at TED, was a co-author of the WiFi roaming framework adopted by the IETF, and has co-authored a number of patents. Niall is a member of UK telecoms regulator Ofcom’s advisory board. Connect with Niall Murphy: Linkedin Crunchbase Twitter * * * FULL TRANSCRIPTION OF THE INTERVIEW: Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a founder that has been through it so many times that it’s even hard to keep count. I think that we’re going to be really learning a lot. We’re going to be learning a lot about survival, too, in real life, and then also in business. So without further ado, let’s welcome our guest today. Niall Murphy, welcome to the show. Niall Murphy: Hi, Alejandro. It’s great to be here. Thank you. Alejandro: Born in Northern Ireland in the ‘60s. How was life growing up there and tell about moving around the world? Niall Murphy: I’ve had an interesting time as a global citizen. I was born in the late ‘60s in Northern Ireland, which, at that time, was a troubled part of the world. Then in the ‘70s, my parents moved down to South Africa. Obviously, I was a young child at that time, and I ended up having my formative years in school, in university, and so on in South Africa, which, at that time, was also going through a significant transition. Alejandro: Yeah. You graduated in the ‘90s, and you were involved with all of the new policies that were coming out, and even meeting Nelson Mandela. So, how was that meeting with Nelson Mandela? Niall Murphy: He’s one of those people that is just a different type of human being. I did some work for him, along with many other people, in supporting formulation of new policies for what would become a democratic government in 1994 in South Africa. I managed to write a speech for him, and so on, which was a great privilege, and sort of awe-inspiring as a human. Alejandro: What would you say was your lesson from being exposed to Nelson Mandela and a leader of that caliber? Niall Murphy: Well, I think it puts any sense of personal adversity that I’ve ever had into context. His ability and his humility and pragmatism, and willingness to talk to anybody on a down-to-earth-basis, given what he had been through, makes anything that I face seem very trivial. Alejandro: So, you did this for a little bit after graduating, but then you went at it as an entrepreneur and launched your first business. What was the trigger? Did you have anyone in your family that was an entrepreneur, or how did you all of a sudden decide that it was your time to shine as a founder? Niall Murphy: I was trained as a computer scientist, but my father is an entrepreneur. He’s a publisher. When we moved to South Africa, he started his own publishing business. So I guess I grew up with a bit of that bug. In 1994, the internet was becoming a thing, so I launched one of the first internet service providers in Africa. I did a joint venture with the U.S. Telco Sprint, and we started providing [4:01] and least-line internet access for a whole 68 kilobytes of bandwidth that we thought was a lot of capacity at that time. Alejandro: Yeah. No kidding. So what ended up happening with the business? Niall Murphy: It built out reasonably well, both in South Africa and in Zimbabwe. Then that business was acquired by UUnet, a British owner, Edge, now, in ’98. Yeah, I made some money, so a successful outing as the first betting. Alejandro: What’s the difference, for example, with operating a business, let’s say, in a region that has that uncertainty like maybe the politics are not as stable as in places like Geneva, where you are now? What were some of the added hurdles to the journey? Niall Murphy: On the one hand, it’s a very green-field environment. You aren’t pushing up against an incumbent. On the other hand, there are very few rules of the road, and so we had to make things up, and we had to identify whole different issues where there were not established policies. For example, I had to negotiate an IP address block for Africa in Washington D.C. and explain that Africa was a larger location than Wisconsin, and we would need a few more IP addresses and things like that. So, basically, just lifted the lid on a lot of uncertainties. But that was great fun. Alejandro: Your next business, after this one, was Digital Thinking Network. Here, one thing that you really, really understood was how to think about the future or think toward the future, and then thinking backward. Can you tell us about this a little bit? Niall Murphy: Actually, joining in the early ‘90s, when I was involved in some of the political work, we were trying to postulate future scenarios, and we had some involvement from some international consulting organizations on this, and I got interested in future thinking, so I co-founded the Digital Thinking Network with a good friend of mine, Daniel Erasmus. He still runs it out of Amsterdam. What we did was we built future scenarios. What a future scenario does is give you possible, plausible futures, driven apps around a particular space. I found that exercise allowed me to get a pretty firm perspective about what might happen, and if you put yourself in a future state, then you can think backward, as you said, to today. What action should I take today if that’s going to be the potential outcome that we would see in the world? My next major project of business I launched in the UK in 2003, with another business partner, in the mobile internet, a WIFI company called The Cloud. That came out of a scenario project I did in 2001 about the future of the mobile internet and identifying why WIFI technology would play a plan to meet the world. So, we took that bet and invested in that area. Alejandro: In this case, what was the next move here after Digital Thinking Network? Niall Murphy: The next move was the foundation of The Cloud. What the Cloud did was to build up WIFI hotspots, so what we take for granted today, having WIFI access in a bar or a restaurant or a hotel, we pioneered that. In fact, back in 2003, we cut a deal to build 3,000 hotspots across the UK, which was globally an unprecedented amount of WIFI coverage and did that with a whole bunch of other groups and spring-boarded the UK into being the #1 player in the world in terms of WIFI access. We worked in partnership with Intel on that initiative. That business then ended up growing into a Pan-European public WIFI operator. Alejandro: And this was your first real exposure to the venture hypergrowth. You raised money, as well, from people like Excel. How was that first exposure to that hypergrowth VC type of environment? Niall Murphy: Yes. Excel and 3i were the current leading investors in that business in 2004. It was a whole new experience to learn to work with venture investors and learn quickly the expectation and the accountability that you have toward the structured institutional investors and also the appetite for growth that was expected, and obviously that we had the empowerment to build a drive. A lot of learning in that first instance. I’m always amazed. Like they say, the definition of an entrepreneur is somebody who has no idea what they’re getting into but knows how to get out of it. I think that as we went into that, certainly for me, we went into that experience with the first serious venture player. I certainly had no idea what I was getting into but managed to make a success of it. Alejandro: Very cool, and here you also saw the full cycle of a hypergrowth company. The company was acquired in a deal that was eight to nine figures, so what did you get from that type of experience, and how did this deal come about? Niall Murphy: We built the business organically through to 2007. We did a cool deal with Apple when the iPhone was launched, so we pre-provisioned every iPhone 1, 2 to automatically work with our WIFI network across the whole of Europe. Then, obviously, the financial crisis happened in 2008, and we were actually in a reasonable position of strength. At that point, we did a whole bunch of acquisitions. I think, all-in-all, we did about ten acquisitions and were able to leap forward the scale of the business on a Pan-European basis. By the time we got to 2009, 2010, WIFI had become a standard part of the environment. So, at that point, the decision was whether it was going to go up to the next level of scale or whether an exit would happen. As it happened, Skype, [10:24] came along and wanted to acquire the business. So for a variety of reasons, that was the right thing to do for that business at that time so it could play at the next level. Alejandro: And in your case, you have a secret weapon, and that, Niall, is that you are a mountaineer. You’ve been exposed, not only to life-threatening events in real life, obviously, in business but in real life, I’m sure that you’ve learned a lot as to how to apply them to business, as well. So tell us about one of those events where you thought probably, at that moment, was going to be the end or could be the end. Niall Murphy: Yeah, I like climbing mountains. The highest I’ve been above the surface of the earth is about 7,000 meters down in the Andes Mountains. I guess I had a formative experience in the Alps almost ten years ago. I fell, and I literally started sliding down ice on the mountain toward a cliff edge, and it went through my head that I was going to go over the edge of that cliff. By some miracle of ice axis and various other bits of luck, I ended up with my feet hanging over the edge of a cliff, but me not going over the edge of it. It puts everything in perspective. Alejandro: Wow! Absolutely and dealing with that uncertainty, and it’s also like a marathon, getting up to the peak on whatever mountain you’re climbing. How do you think that you’ve been able to apply that to business and to building companies? Niall Murphy: There’s a fantastic expression in Swahili that says [12:07], which means one foot at a time. If you climb Kilimanjaro, the guides will tell you that. I think that patience, and if you keep putting one foot in front of the other, you will get to the top. I think that patience is a really important philosophy. Also, secondly, when you’re in a storm or in a crisis situation, it doesn’t help to panic. It’s important to remain calm and look at tools that you have at your disposal, be pragmatic. I always like to say the only way forward is upward. Alejandro: Absolutely, and those panic situations are always on the menu if you’re building a startup, so that’s good stuff. Thank you for that, Niall. In your case, after the acquisition of The Cloud, you started doing some angel investing before you went at it again with your most recent company. I want to ask you here when you were doing some angel investing and seeing other founders and learning from their own journeys, what were some of the things that you were able to recognize? Maybe there was some pattern recognition there that you developed on being able to differentiate what makes great execution and what makes execution that is destined for failure? Niall Murphy: This is, obviously, a much-said thing, but it’s all about the people. If you have an ability to create a great team, that is the biggest precursor to success. I’ve seen people with great products that just couldn’t put a great team together to exploit that product capability or people that have got a great team and then went hunting around for a product. The latter is much more likely to be successful in my experience. I found that I wasn’t a great angel investor. I found it very difficult to be involved in a number of different projects and not be the person that was in control or driving the initiative myself. So, after doing that for a little bit, I decided to focus on one key idea that I wanted to develop myself. Alejandro: Let’s talk about that. How did you come across the idea of EVRYTHNG, and what was that process of bringing it to life like? Niall Murphy: It was another scenario project, which is looking at the Internet of Things, but how connectivity was coming to everyday objects. The thought experiment that I did is if you follow the trajectory of Silicon Technologies and Century Technologies, we would get to a world where every physical thing made would be connected to the internet in one form or another. If that was the case, then what would that mean? What kind of information environment would that create? I got fascinated with the idea that just like we thought social networks of human beings like Facebook or LinkedIn, where would be the graph of physical things? Why can’t you Google a pair of shoes, literally, a pair of shoes on a shelf in a store? If everything did get connected to the internet, that would become possible. That sort of future world fascinated me, and then I got focused on how physical things would be digitally identified on the web, and that’s what led to the foundation of EVRYTHNG. The reason the business is called EVRYTHNG is that we felt that everything would be connected. I hunted around the world. I found two Swiss computer scientist who, at the time, were at the AlterID Lab at MIT and had developed something called the Web of Things. This was back in 2011. A long story short, I dealt with them to bring them on board, and the work that they’ve done with the Web of Things and that led to the formation of EVRYTHNG. We had a point of view about technology and the digital identity on the web of physical things as being the basis of our intellectual property. The problem we went about solving was how we would help the companies that make and sell things, the consumer brands of the world predominantly, know where all this stuff was at any point in time. Alejandro: So how did you go about building the team? Niall Murphy: In this project, we were able to bootstrap with venture capital investment from the get-go. Atomico was one of the first investors in the company, and with my partner, Dom Guinard, who is now my co-founder and CTO, and a couple of other partners, Andy [16:52], that’s what formed the initial team. We were able to recruit some great engineers in Switzerland and Eastern Europe and then went looking for a pioneer customer and found one in the form of Diageo, the drinks manufacturer. We did an initial project in 2012 that proved the value of the technology that we were building and did a couple of other projects. But that led us to a place where we could do a Series A investment round in 2014. Alejandro: For the people that are listening to really get it, what ended up being the business model of EVRYTHNG. How do you guys make money? Niall Murphy: EVRYTHNG makes money by providing digital identity for products. We manage the digital identity of each individual product that a manufacturer makes. For example, we track every Moët & Chandon champagne bottle around the world. We track every Ralph Lauren Polo shirt around the world, and we earn revenue for managing the digital identity of each one of those items. It’s a Platform as a Service business. You could think of it as a business model very similar to Salesforce.com as in those manufacturers are describing to the EVRYTHNG product cloud platform, but instead of managing CRM records like a Salesforce business does, we manage the digital identity of individual products. Alejandro: Going back to the actual fundraising, obviously, this was not your first time going at it and raising money from outside capital; what were you look at some of those investors that you really wanted to be involved with on something like this? Niall Murphy: Aside from capital, we also wanted reach, relationship-reach. In founding EVRYTHNG as a European entrepreneur – I guess I’d call myself a European entrepreneur now. One of the things we recognized is that our target customers, the global consumer product brands, about 60% of those companies are headquartered in North America. What we needed to do if we were going to be successful was to have some foundational investors in North America out of the gate. What we would not be able to do would be to successfully build this business in Europe, and then some years later get into the American market; we would probably lose the window. So we found some super angel investors in North America who were both able to bring capital and great network access. Later on, we added a Silicon Valley-based venture fund, Sway Ventures, as a key investor in the business, and some other corporate investors, Cisco, for example, became a strategic investor in the company. All of that is about how to build the right network of relationship reach and ecosystem insight as well as getting capital. Alejandro: How much money have you guys raised to date? Niall Murphy: In total, we’ve raised about 60 million dollars to date. Alejandro: Understood, and just so that we get an idea on how big everything is today, is there anything you can share in terms of the number of employees or anything else? Niall Murphy: Yeah. We’re about 70 people. We’re working with a number of the major Fortune 500 brand owners. I mentioned some names already, but folks like Unilever, Ralph Lauren, Lululemon, PUMA, these kinds of companies. Growth has been good, and I expect our monthly recurring revenue to grow north of 50% in 2020. It’s progressing positively, notwithstanding the fee of the challenges of COVID. Alejandro: Absolutely, and as we’re looking into the future, there’s one question that I wanted to ask you here. Imagine that you go to sleep tonight, and you wake up in a world five years later – it’s a tremendous snooze. You’ve been able to catch up for all those sleepless nights. Basically, you wake up in a world where the vision of EVRYTHNG is fully realized. What does that world look like? Niall Murphy: It’s a world where every physical object around you is an interface, actually. So by pointing your phone, or whatever it is we call a phone five years from now, at anything, you can access information about what it is, but where it came from, and you can access services and so on that might be associated with it. I guess my hypothesis is that the possession of physical goods will gradually become replaced with physical goods being a service, just like automobile ownership is being replaced with the Uberization of cars these days. So we’ll see a lot more rental of all sorts of physical types of things, and if you’re running out of something, you can just ask it to reorder itself – that kind of an experience. And every physical object being digitally engageable like that is probably the type of world that we’ll see. Alejandro: That’s pretty cool. I mean, definitely, a lot going on in the space that you’re in. One of the things that I wanted to ask you here, the journey with EVRYTHNG has been remarkable. One of the things that is true here is that timing is everything, and I’m sure that a lot of people that are listening right now are probably wondering about product/market fit and being at the right time in history and all of that stuff. In your case, when you guys got started, it was a little bit early. Niall Murphy: Yes. I think that we launched the company probably four years early. Relative to what we now know about the market timing. The big challenge for a business like EVRYTHNG is that we’re providing a specific part, which is the Cloud, data intelligence, and data management capability. But for us to succeed, we needed the cost of digital sensors or digital tags on everyday items to be low enough. We needed smartphones to automatically scan and interact with products on a ubiquitous basis. Apple and Google didn’t upgrade the mobile operating systems so that your camera could automatically scan QR codes. They didn’t do that until 2018. So a bunch of the ecosystem elements were just not sure enough during the first few years of our business. So, obviously, you make a bet on timing when you start a company, but you’ve really got to be quite careful about tracking what those trigger points are and make sure that you can survive to the point that they actually mature. I think we were lucky. We were good at raising capital. We were able to build intellectual property value, and so on during that early time and able to find good pioneer customers. I always say that if you don’t survive, then you’re not present to play the game when the market accelerates. I think that’s a very important phase. The early-stage where you’ve got to survive, and you’ve got to get to the starting point, so to speak, and then, of course, the whole thing shifts, and it becomes a race to keep up with the acceleration of the opportunity. That’s certainly the nature of the environment we’re in now. Alejandro: Pretty cool. As we’re talking here about lessons and things that you learn along the way, there’s one question that I really enjoy asking the guests that come on the show, and that is if you had the opportunity, Niall, of going back in time, and maybe we go back to the ‘90s, where you started getting involved with launching companies. If you had the opportunity to have a chat with your younger self, with that younger Niall before launching that first business, what would be that one piece of business advice that you would give to your younger self and why given what you know now. Niall Murphy: That’s a good question. I think I would tell myself to stop believing my own bull **** and look carefully at the people that I’m putting around me because building a great team is what’s going to make me successful. It took me too long to realize that. So, that’s the advice I’d give myself. Alejandro: That’s fantastic. Well, Niall, for the people that are listening, what is the best way for them to reach out and say hi? Niall Murphy: I’m on Twitter @nialltweet. I’m on email at niall@EVRYTHNG.com, or you can easily get ahold of me on LinkedIn. Alejandro: Amazing. Well, Niall, thank you so much for being on the DealMakers show today. Niall Murphy: Alejandro, thank you. It’s awesome you’re doing this, so a pleasure. * * * If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at firstname.lastname@example.org.
36 minutes | a month ago
Rodolphe Ardant On Raising $60 Million To Help You Control Spending
33 minutes | a month ago
Krish Subramanian On Raising $100 Million To Help Your Business Move To Subscriptions
Krish Subramanian is the co-founder of Chargebee that offers subscription and recurring billing system for subscription-based SaaS and eCommerce businesses. It is built with a focus on delivering the best experience to provide a seamless and flexible recurring billing experience to customers and manage customer subscriptions. The company has raised over $100M from top-tier investors like Steadview Capital, Insight Partners, Tiger Global Management, and Accel. In this episode you will learn: How Chargebee figured out their own subscription pricing Tips for structuring subscription pricing tiers His top advice for gaining velocity The different paths bootstrapping and VC money puts you on SUBSCRIBE ON: For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here). Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below. About Krish Subramanian: Krish Subramanian is the Founder & CEO at Chargebee, the startup that lets you go beyond billing, payments and recurring invoices — to delivering subscription experiences that “wow”. To date, Chargebee have “wowed” some of the world’s leading VCs to the tune of $24m including the likes of Insight Venture Partners, Tiger Global and Accel Partners. As for Krish, under Krish’s leadership the team has grown to over 200 people and over 5,000 clients making it one of the next generation in truly global SaaS businesses started in India. Connect with Krish Subramanian: Linkedin Crunchbase Twitter * * * FULL TRANSCRIPTION OF THE INTERVIEW: Alejandro: Alrighty. Hello, everyone, and welcome to the DealMakers show. I think that today, we’re going to be learning quite a bit. We’re going to be learning about how to get inspired to build a new business, how to develop the expertise and the skillsets over the course of time so that you can go at it on your own terms and have an idea of what the path forward looks like. But without further ado, I’d like to welcome our guest today. Krish Subramanian, welcome to the show. Krish Subramanian: Thank you, Alejandro, for having me on the show. Alejandro: How was life growing up in Chennai in India? Krish Subramanian: I grew up in a middle-class family, with a joint family, with my uncles, grandparents, and everybody else together. That is why I’m an ‘80s kid. I was born in 1980, and it was a joint-family setup. I did my schooling in private school. There was a lot of emphasis on education, especially English education, so even though my parents – it wasn’t bad, but at the same time, there was a lot of emphasis on making sure we were getting good education. I am grateful for that. We went through private schooling. We did VaniVani in Bachelor Engineering and Computer Science. Living in India, we have this joke that most people graduate with engineering and figure out what to do in life, so that happened. Along the way, I think I also got a chance too. When I was in the eighth grade, I had the opportunity to get the award of 386 Computer and started tinkering with it, and that’s how I developed in computers, programming, and all of that. It was a natural choice for me, thankfully, to want to take up my Bachelor’s in Computer Science. Alejandro: In India, you were alluding to it: you study engineering, and then you figure out what you do next, and that’s actually what happens there quite a lot because there’s a lot of pressure around education. That’s why, maybe, there are so many great engineers and also great entrepreneurs coming out of India. But what I’m thinking here is, in this case, you went and worked at a startup right out of your university, right out of your studies, instead of going the more traditional path of working for a bigger firm. So why did you decide to take this route because it seems a little bit risky given the pressure around the best education and the best companies and so forth? Krish Subramanian: I don’t want to glorify that with something that is not true. The truth was, this was in 2001, 2002 when the entire economy, the world economy was bad, and IT services and companies were not hiring. Given a chance, everybody would flock to a big-name brand. But I was very fortunate when the founder and CEO of that company was someone that my family happened to know, and he happened to come to the city. He just met me for half an hour and said, “Okay. You seem to know all these programming languages, and you seem to have this. I have a company. Maybe I have a job for you. Just come and meet me in Bangalore. I went to him, and he gave me a chance. This was in 2002, and I’m very grateful that somebody took a chance to give me a chance for a programming job. It just so happened that I started developing a product with him, and we launched it for a government agency of all the things because governments are the slowest ones. We tend to think they are software slowly, but we had an opportunity to develop the pre-cursor for SaaS. I don’t know if you remember this thing called ASP, Application Service Provider model where you would host the browser-based software yourself, but it’s not particularly in that picture. That is what we built as one of the [4:57] products back then, and that is what I did. But, Alejandro, again, I made a stupid mistake of actually leaving that company in a year and switched to a big-name brand. So I went to services and product implementation. I think we only connected the dots backward, like Steve Jobs. Even though it was a decision made out of probably pressure from family to actually have a high-earning job of other things, and also a big-name brand, I switched there, but thankfully I got in two product implementations, and that is what I learned for the next nine years working with global Fortune 500 customers and implementing this product called Ariba. Later on, in my career, with this other product called [5:43], the pricing implementation space, but mostly on the services implementation site, was what I specialized in. Alejandro: Got it. After this, you went to TCS. You also went to Cognizant. Here, you were doing more of what you were saying, which is working with global customers prior to implementation. But I think this was really the segue for you to eventually start your own thing and go at it with Chargebee. Tell us about that process of meeting your co-founders. They were working at Zoho. How did you guys all come together? Krish Subramanian: Sure. Chargebee is a subscription management and building solution. We sell to customers in [53 6:27] countries now and having significant customers and [6:31] customers in North America, [6:32] customers in Europe. That’s the global customer-base that we have, but all this comes from the knowledge of having and building a global playbook that comes from Zoho. One of the co-founders is Rajaraman. He worked at Zoho for more than ten years. He was my college classmate from engineering days. That’s how all of us know each other. That’s the common connection. Rajaraman and I went to college together, studied in the same class. We were best of buddies back then during college days. We did not hang out that much, but later on, when he worked at Zoho, we used to catch up on a regular basis, and he used to share the inspiring story of how a bootstrapped company from here, from Chennai, was building a global customer base, and he was getting an opportunity to build products. I think today Zoho is more than 22 years. They’ve been building a bootstrapped company of millions of customers worldwide, but back then, just getting a chance to do that in an industry where everybody is working in IT services, but these guys were getting a chance to build a global product was something very inspiring. We used to talk about saving up enough so that we would give ourselves a chance to start a company at some point in time, which was his advice, and we definitely planned financially to make sure that we were saving up over eight to nine years to make sure that we would give ourselves a chance because we don’t have the financial background to just start a company. The aspirations as a middle class is to own a house, and then get settled, and things like that, they’re normal pressures. So we were saving up, but in the back of our minds, we were thinking, “We want to save enough so that we can do this.” We were very frugal to the eight, nine years of building our career that at some point, we’ll quit and start. We were planning this. We just did not know when, but it just so happened by 2010, 2011, a lot of things in the market were coming together where SaaS was taking off, the cloud infrastructure of cost was coming down as well as democratizing how you could build a company from everywhere, like from Asia, [8:40] engineer. These companies were really changing the landscape of how you can have a laptop, build something, and then put it on the cloud, and then compete globally. I think the democratization process, we could see the changes happening in front of our eyes by 2010. Then, one of the friends also started this company, FreshBooks. You might know them. Alejandro: Yes. He’s been on the show, actually. Krish Subramanian: So, they also come from the same Zoho School, which they learned how to build product there, as well. It means that when they started in 2010, Rajaraman had the pressure to either join them or come on our pack and start the company. Of course, I was waiting for this opportunity. I used to live in the U.S. and then came back to India just to make sure that I didn’t miss out on the chance. When this opportunity came, we said, “Of course, we are starting a company.” First thing, we incorporated the company without worrying about what works idea. That is what we did. Then we quit and figured out what to build. Alejandro: So, here, saving money for eight to nine years to start the business, was it a specific amount that you guys were targeting, or was it like a specific amount of runway that you wanted to have, or was it like coming up with the right type of idea at the right time? Krish Subramanian: I think it’s a very good question. We didn’t have a particular target in mind. It was just a question of – I think we had a document that he shared saying – I’ll give you an example. In India, at that time, I think the salary was – I think you will laugh if you actually tell you the salary. It was roughly $300. Alejandro: Wow. Krish Subramanian: I’m talking about the 2002 timeframe. If you had to include the inflation and all of it, probably some $300 dollars per month. And that’s still a lot of money. And we used to live with parents and all of that. As a society, this was normal for people to live with parents even till you get married or even post-marriage. When I was still a bachelor, usually with parents, you can comfortably save probably $250 out of the $300. What we used to do was, make sure we signed up all of that money into the similar 401K in the U.S. There are additional savings options. So, we used to just save up money. And any increment that we used to get in bonus pay and all of it, we used to keep away some of the money, put it in mutual funds, and the stock market, and all of that. But make sure that you were conscientiously saving and not spending the money. You only keep a small amount of money for yourself, and then you learn to use that. I did not buy a car for the first seven or eight years of my career. I bought a car only after my kid was born when we had a need. Till then, we used to go by bike, which is normal, as well. So, deliberately having a frugal lifestyle generally was helpful. It was not a target, but at the time of quitting, there was some good advice available to us from other entrepreneurs. One person told me, “Make sure you have a least 36 months of runway.” But, unfortunately, I did not have 36 months of runway, which, if figured out after quitting, because after you start spending, you realize that everything takes longer – double the time, and everything costs you more. But that advice was, “Make sure you stay around for 36 months. By the end of 36 months, you’re likely to figure out what to do. Otherwise, if you quit too soon, you are likely to [11:59]. You’re smart enough to figure out something, but just stay for at least three years,” was the advice. But, practically, it’s harder. Alejandro: Got it. So then, in this case, what was that process for you to really put this in motion and to come up with what ended up becoming what is Chargebee today? Krish Subramanian: May 2011, when we quit and started, all of us had designed and joined and decided to come together. Just a couple of weeks before starting, we decided to research what to build. We were clear about a few things. One, it had to be SaaS because nobody else was building software any other way, and we could see the trend where it was going. It had to be global because that’s what we understand better, and it had to be B2B. We come from a school of thought where we could build from assemblies and then continue to go to market was something that we thought. We looked at two or three spaces. One was performance optimization space, but every SaaS company that was building, what would the developers need? Today, we know the spaces [13:01] space where we build the tools for developers, too, [13:05]. We looked at that one. Another idea we looked at was single sign-on, which is [13:11] space. Today, we have a public company. Then, the other one we looked at was, of course, recurring payments. At that time, we did not know the complexity of the problem, but we were comfortable with picking any problem, as long as it was something that every company would need in the future, and if we can elegantly solve it through an abstraction of the idea, and make it very easy so they don’t have to do it themselves. We figured we would find a way to find more customers and build a business. Thankfully, we did not plan on raising capital at all, so we did not have to justify a market size. We did not know any of that because we don’t have a media background. So we started with what we know well, which is running a customer problem, and does it exist for a lot of people, and is there something we can bootstrap our way to success? So we used that framework to pick a problem, and we fell in love with the problem. I must add that we are on boarding people, so we like good boarding problems. Alejandro: Well, those are the best problems to solve. In this case, for you guys, Krish, what ended up being the business model of Chargebee? How do you guys make money so that the listeners get a good understanding? Krish Subramanian: Sure. Our pricing is aligned with the growth of our customers. We have a freemium product where you can start with this and then evaluate your idea up to the first [$3,000 14:36] of aggregating once [14:38] is free. Once somebody tested out, and by the time they get the first [$40,000 14:44] of [14:44], probably they are at some [$2,000 14:48] of recurring revenue. Then the move into a $99 preferred plan, which has a set of features that are already included in the freemium deal. So they, naturally, upgrade to that. Once they go into the next phase, then they move into the $299 plan that includes – that is enough to make probably 1 million dollars of [15:07]. Then the next year, is a gain and upgrade. That’s how it started, where we have different tiers where we are aligned with revenue with the customer’s growth based on how much they are charging their customers, and we segmented by features. But, in hindsight, I’m able to talk about it as if this is how the pricing was started in all of it, but it was nothing like it. In fact, we made a lot of stupid decisions to start pricing in very different ways where it started with [15:36 – 15:41]. It got around a set of customers, and a lot of mistakes, Alejandro, that probably is of interest that we can talk about. But through a number of migrations and customer feedback, we got to where we are to find now three segments of customers. One is a startup segment, which is a zero to 1-million-dollar customers. Then, our scale-up segment, which is the [16:00] stage of customers, and then the [23 million 16:04] to 100 million+ customers that are our grow customers. That’s how we internally segment our customers and align ourselves with our customers’ needs, which is a startup customer may want everything self-service. Somebody who is product/market fit and growing really fast needs more additional help, and also some kind of solutioning pre-field sale and implementations support, and subsequently, priced customers need the white-glove service to ensure that we are bringing everything to the table including [16:33] services implementation to help them grow. So that’s how we aligned ourselves with our customers by their stage, and that’s how we make money. Alejandro: In this case, for you guys, it took a little bit of time to raise money, and that’s something that you had inspired yourselves with the story of Zoho, where they bootstrapped themselves to hundreds of millions. In this case, there were a couple of years, and now you guys have raised quite a bit. How much capital have you guys raised to date? Krish Subramanian: After the first two years of bootstrapping, we have raised 105 million of capital. The most recent round was a [50 17:13]-million-dollar of capital led by our existing investors. So there are 40 investors. Initially, it was Accel and Tiger Global in 2013 and 2015 investments. Later on, in 2018, three years later, we raised from Insight Venture Partners. Then in 2019, from Steadview. The most recent round that we just completed two or three months back was led by all of our existing investors. Alejandro: At what point did you say, “All right. Now we’re ready to raise money”? Krish Subramanian: The first round was not driven by, “We are ready to raise money.” It was more of conversations with a bunch of investors. While we started with four of us, and even though I come from a software engineering background, I had already spent ten years in services, so I was [17:56 – 18:01]. I decided to figure out everything else like go to market, what are marketing scales, how to build an engine, and also investment, and everything else. That is where I spent most of my time learning how to talk to customers, and [18:16] customers, and all of that. In that process, I also met a bunch of investors who were keen on thinking, “Is this a good team to bet on in all of it. Even though we were not raising money, they wanted to – that’s a VC’s job to reach out. Then they want to invest in good things. It just so naturally happened that we really liked interacting with Accel a lot, especially [Shaker Ferrari 18:41] on our board. And he challenged us with a lot of things, what customers wanted – very fundamental first-principle questions about what problem are you trying to solve for them, and why do they need it? Why can’t they do it themselves? Good questions that challenged our assumptions and helped us think better. This was close to a year-long relationship where we used to interact every few months, and every time, we used to go back with more clarity, more proof points, and it was really helping us. We thought, “It looks like it’s a hard problem to solve.” By the time we were close to one to two years, we realized that this is probably a large opportunity, but also a big problem to solve, and this is going to take a long time to figure out because the market is still not – the category is not mature. It’s still a very nascent cap. With that realization, we decided to have somebody, an investor, who can help shape the product/market fit. That’s why we took money from Accel. But everything else was easier from – when I say easy, it was natural from that point. Once to come to existing to taking money from investors, you have to stay committed to the part of alignment with investors. It’s very important to do that. If you’re a bootstrap founder, you have a different path, and if you take money from investors, then you have a different path that you’re committing to figure out can this be a large business? That is what we set out to do, and that put us on the path of a very interesting product/market fit cycle for another three years, where we searched for the right product/market fit that would allow us to build a large company. That happened over the next three years or so. Alejandro: In this case, we keep talking about customers and the importance of iterating and catering to give them the absolute best solution that you can. In this process of listening to your customers, is there something that you’re looking for or maybe a specific question that you typically ask where you do a deep dive on those answers that give you the right data and insights to make decisions? Krish Subramanian: Yes. I can actually talk about people that I did not get as customers and how that helped us. There used to be a company called Recruiterbox. The evaluator charged me, and they did not choose us. This was when we had a $14 or $17 price point. They did not tell us why they did not choose, but finally or later, we saw that they were doing well. They hired a good number of customers; they had good market traction. So what I did was I went and met the founders to sit with them and ask them, “What changed between one year later. How did you think about the position then, and why did you not choose us, and how do you think about it today?” The answers were very insightful because they said, “At the time, you were one of the first products that I would have paid for because [21:33] and I did know if my idea had links, and I don’t have any customers, and you were asking me to pay $79 per month.” I thought, “Okay. This is something that I can build myself.” So I decided to build [21:50]. One year later, I realized that I had done so much work on top of that, which I shouldn’t have done. Now, for me to scale from here to the next stage, probably they thought it was going to be more, but my problems are different now. I have to spend all of my developer time in building my product. I think in hindsight, it might have made sense. They should have probably gone with me, maybe they would have spent more. But at that time, it felt like it was still, even $99 looked like a lot of money.” So, it was very insightful to understand their mindset of a very early-stage customer where there is no money available and no customers available, and even $99 looks like a lot of money. Compared to somebody even with a few thousand dollars in revenue, suddenly, they feel comfortable with, this is not the most important problem. Saving $99 is not the most important problem. But they want the best solution. They don’t want the cheap solution. They want the best solution that would allow them to scale if everything works. Just trying to understand the noise of how an entrepreneur was thinking in the early stage versus somebody who’s scaling would think [22:55]. The other customer was [22:58]. It was a charge customer, but we had a very similar journey where they also started in the 2010 or 2011 timeframe. The company was named differently – a French company. I remember a call where they asked for a discount on a $79 or $99 product, and I gave them some discount – a $20 discount, and then got them on board, and they implemented it. One or two years later, I met Matt [23:25] in his office, and he said, “Krish, don’t charge me more because I’m going to tell you something that I shouldn’t be saying, but maybe you should have charged me $1,000 a month because that’s how much value I’m able to see today in terms of effort that I don’t have to put in to maintain this. Maybe you should have charged more; maybe it would have helped with credibility.” It was a very interesting observation coming from a customer who is teaching you something about the perception. These kinds of continuous customer conversations where you try to understand how they think about you, then versus now, and the ones who actually choose you, even the customers who are not choosing you, just trying to understand these things are very helpful to learn first principles, Alejandro. Alejandro: Yeah, 100%. It’s interesting, those insights, how to how sometimes when you charge a bit more, it can give the social proof or the credibility, so that you’re not seen as the cheap option kind of thing. Right? Krish Subramanian: Correct, because it’s also the nature of the solution. Because it’s a B2B solution, and they want the best solution for their product so nothing will go wrong in their customer experience. They are looking for the best solution available in the market. It’s very important to be able to relate to it and think about the motions of the process and not just the mathematical way of proving that this is the right solution. Alejandro: In this case, you guys have raised quite a bit. You’re now in scaling mode, growth-stage mode. Was it that challenging going from the early-stage phase to the growth-stage phase? How was that for you guys? Krish Subramanian: It never gets easier. Right? Once you establish product/market fit – based on all this feedback, we established and introduced freemium, but we also had our premium pricing for the larger customers, service offerings, and all of that. Getting to the first million was a very interesting path where you try to get any customer as your customer. Then, when you have enough data, a few hundred customers, it’s very important. For me, the biggest because who are your most important customers from that first 200 customers because maybe your next 200 customers should be similar to the 20 or 40 customers that you have today, and not all your 100 or 200 customers are your best customers. You have to understand, “Of these 200 customers that I have, which 20 or 40 do I want more of?” Then, we have to finetune the go-to-market engine to ensure further that we are finding more of them to find the next 1,000 customers similar to them. That is what gets us slide wheel going where they stay longer with you; they use your product more; they pay you more. You build a machine where you’re able to go where the customer demands more from you. You want to align the product for a customer who wants more from you. And they will also be willing to pay more. This [26:24 – 26:28]. Many times, if you miss out on understanding the existing customers and think about – it’s very important for a founder to think that maybe it’s very hard for us to be everything for everybody. We are going to be everything for somebody, but it’s very important to find out who those somebodies are. That requires us to introspect. That is what we went through in 2016, and we found the types of customers who consume our API. They have developers; they have a CTO, and they like you using the product, and they have the ambition to build a large business. Those are the types of customers for which our product was most suited. Not for somebody who was saying, “I want to build a micro-business,” which probably will only have 10 or 100 clients. [27:16] business like that. It was very important to understand the distinction between these two and then drive our focus toward that type of customer. That allowed us to go from 1 to 5 million in five quarters. Then, we continued doubling from there every year in terms of team, revenue, and the process. Alejandro: Yeah. You were alluding to team. I wanted to ask you here, what’s the size of the company today? Any numbers that you can share – team members or anything else? Krish Subramanian: Sure. We process [300 27:49] billion dollars of our customers, and that’s growing into around 100-person a year. We are a team of 450 people, with more than 375 people all over India. Then, we’re 50 people now in the U.S.; then we also have a team in Europe. Before COVID, I used to say San Francisco, Salt Lake City, Amsterdam, and [28:14], but now it’s distributed, and pretty much people are at their homes, and now it’s more globally distributed. We also have a few team members in Australia. So the customer base is global in [43 28:25] countries, and now the employees are also global, everywhere – a team of 450 people. Alejandro: That’s an incredible growth that you guys are experiencing, Krish. Very, very well done. Now, imagine that you go to bed tonight and you sleep for five years, and you wake up in a world where the vision of Chargebee is fully realized. What does that world look like? Krish Subramanian: The reason we started the company was to learn how to build a good product organization that is people-centric. I think one thing that I missed telling is there are more than 25 ex-founders who are part of Chargebee. I think it’s very important to preserve the entrepreneurial customer, so in five years, what would look like success is more companies, more founders, who actually go out and build companies out of Chargebee would be phenomenal. Probably, we would have also built 700 million dollars in revenue and have built an engineering institution that can sustain beyond us I think would be phenomenal. Hopefully, I think the biggest success will be more people who learn how to build products from here and go on to build bigger impactful companies that I think will be even more beautiful, Alejandro. Alejandro: I love it. Now, imagine that we go into the time machine, and we go back to 2011 to that moment where you and your co-founders were thinking about doing something. Obviously, it has been an incredible ride for you guys – the ups, the downs, the good, the bad, and the ugly of building and scaling a business because it’s not a straight line. It’s not what people would typically read on the media with all the big numbers and all of that. There is a lot of sweat and tears that go into it. Basically, if you could speak to that younger Krish and give that younger Krish one piece of business advice given this incredible journey and all the knowledge that you’ve been able to gather, what would be that one piece of advice before launching a business that you would give to your younger self and why knowing what you know now? Krish Subramanian: Understanding that growth creates opportunities is one piece of advice I would give to that younger Krish. What I mean is, if you prioritize achieving certain numbers that are put in front of you and try to achieve those goals, and how difficult it is, it aligns everybody in one direction. Otherwise, we assume that all of a sudden, working in the same direction – but speed is not velocity. We may be moving in different directions, even though it’s just a few founders starting. If there’s one thing that I would actually advise, it is to prioritize growth. Just put some number in front of you and then work toward that, thinking you have [31:19] to actually try and do things because there is a limit and a mode of energy that is there with us. It’s very important to prioritize and create an impact. It can be about building a happy, small company or building a large company, but having the co-founder alignment and making sure you’re able to prioritize growth is one piece of advice I would give. Alejandro: Absolutely. Without alignment, there’s nothing. So, Krish, for the folks that are listening, what is the best way for them to reach out and say hi? Krish Subramanian: My Twitter handle is @cbkrish. My email@example.com is my email. Alejandro: Fantastic. Well, Chris. Thank you so much for being on the DealMakers show today. Krish Subramanian: Thank you so much for having me, Alejandro. * * * If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help, whether it is with your fundraising efforts or with selling your business, you can reach me at firstname.lastname@example.org.
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