Sramana Mitra: What did you do in 2005 when you started this company?
Brad Peters: We needed to do two things. We had to get some funding because we didn’t have personal savings to be able to survive very long. We needed some seed capital. We spent a lot of time thinking through markets where, with a single sale, we could get enough customer traction to fund the company for a period of time. We could raise a little bit of external capital but we could also, on a single customer, drive a lot of the early development that we needed. We didn’t have a bunch of sales people calling customers. We had to have a few large transactions that we could focus on and build around. We tried to find a market where there was a lot of value to be delivered.
What analytics ultimately does is it makes employees more effective. Employees can make better decisions with it. Instead of hiring 10% more people to get more value out of your organization, you can make the existing people you have 10% more effective with the help of analytics. That’s always been the value of analytics – helping people who make decisions on a regular basis make better ones so that the organization is more effective. What we were trying to find were organizations where individuals had decisions to make on a regular basis. They had a lot of data that they could use to make those decisions. They were valuable employees so that if we increased their value, it was meaningful to the company. We were trying to find places where there’s high concentration of value and data.
An obvious place where we knew that was happening was the financial services industry – in particular, wealth management where you got a lot of people who maintain relationships with wealthy customers. Their job is to bring in dollars into these financial services institutions and then understand their customer needs better and run a business around bringing in and managing money for people. We ended up converging on that as our initial market.
Since we didn’t have a product yet, we had to figure out a problem that would be important to those people where we could drive the needle in terms of meaningful business improvement – that we could lead with PowerPoint presentation without actual software. We spent some time trying to find sympathetic people in major financial services institutions who were willing to make a bet on a couple of very motivated, early entrepreneurs who were trying to create advanced analytics for their industry. It took us about seven or eight months to get out first customer. It was a big customer. We had another one waiting in the wings for probably four to five months after that. Once we got those customers, they were enough to fund us for a period of time. We basically went heads down to make them successful for a year.
Sramana Mitra: Can you talk about these two customers that really got you off the ground? What were the terms? You are talking about a process that is very much the core process that we espouse in 1M/1M. People need to engage with customers as quickly as possible especially if you’re dealing with enterprise customer. Getting them to pay as early as possible is very desirable. That’s a process that is very in sync with our methodology.
Brad Peters: That’s always an interesting thing to go through. Ultimately, they’re making a bet on you in the process. We knew our model had to be a subscription business. The idea was always, “Let’s go in and sell them something where they don’t actually have to care how the sausage gets made. We’ll take care of all of that. They’ll pay us a certain amount per year to deliver a service to a certain number of employees and we’ll charge on a per employee basis.” We worked through that.
We found two different companies that had a very rudimentary version of what we were discussing so that we didn’t have to sell completely from scratch. They already had a vision for what this thing could become and they already had a basic road map. We had a much more expanded vision of where that could go. We found some precursors in these companies. We had a deadline for when that was supposed to start. We had to have it delivered by a certain day and the payments turned on then. We had enough seed to get us through that period and the payments that we got were essentially quarterly upfront.
Sramana Mitra: Based on milestones?
Brad Peters: Yes.