Sramana: Did you ever pursue venture funding?
Hemant Shah: We were able to get venture funding in 1992. That was our first proper round of funding which allowed us to build out the business.
Sramana: How many customers did you have before you were able to get venture funding?
Hemant Shah: We initially had five customers. They were real paying customers. When we got our first $25,000 check, we framed it and put it on the wall because that was a lot of money to us at the time. In aggregate, we probably had a few hundred thousand dollars come in.
Sramana: It was validation from customers that you had something of value.
Hemant Shah: We did not need very much money, so those checks were fine. We did not have any expenses. Our product was software and our office was my apartment. Many of those customers who validated our product back in the day are now part of the family. They were part of the initial venture almost as much as we were. They helped us create a reasonably sized business.
Sramana: Which VC stepped up to fund you?
Hemant Shah: Sutter Hill Ventures stepped up. Len Baker and Paul Wythes saw us as a diamond in the rough. They were willing to look past our lack of rigorous business thinking and focused on the models that we sold. They realized that we had the opportunity to become a standard and thus create the very demand for our product in our marketplace. They had the courage to invest and we raised $3 million in late 1992. That really helped us build out the team.
At the time I was only 26 years old. It was a real learning experience because we had to bring a CEO on board. That was something the VCs wanted. They saw us as a bunch of academics and scientists, but not business people. They introduced us to Tom Hutton, who is a great friend of mine to this day. He was our CEO from 1993 to 1998. Now it would be fashionable to call him an entrepreneur executive in residence. He helped us grow the business to $30 million in revenue. He helped me and the team build a business.
Sramana: What was your relationship with him like in the early stage?
Hemant Shah: At first it was a bit humbling to realize that you need help. It is a learning experience. For him to come in at the time with all of that experience was humbling. He taught me a lot about business. He understood the importance of creating a defined business model. He thought about scaling a business around a great idea. Were we licensing information or were we selling software? He put a lot of rigor into those issues.
Sramana: Did you accept him as your coach?
Hemant Shah: Yes. He was my coach and my mentor. He was incredibly patient with us. It was an important part of my learning and the process of building a business. I had to learn how to accept help. It was not like I went out and had the foresight to recruit him, but once he joined it was important to accept his role. It could have been tempting to have the mentality that we had a great 25-person business and that we were selling software, so we didn’t need help and we could live in our niche.