Sramana Mitra: Was the seed that you got enough to get you to the next milestone or did you have to raise?
Brad Peters: We raised seed financing before we started. We couldn’t afford to make the mortgage payment without a little bit of seed financing. We got a little bit of seed financing from some VCs and paid ourselves next to nothing, just enough to keep the lights on.
Sramana Mitra: In terms of raising the seed money, what did you sell the VCs? What was the investment thesis that you sold the VCs?
Brad Peters: It was a long line of what I was explaining, which was, “Analytics have to go cloud. We have a theory on how that should happen.” I think everybody was thinking a lot of these software categories are going to go cloud. No one really knew exactly when or how. Analytics was particularly complex so we basically pitched, “We have a way to cloud. We have the way to bring analytics to cloud.” Some early stage VCs who do this for a living were willing to take a bet, “If these guys can do what they say, this is a $10 billion market. Let’s see where these guys go.” They gave us a small, low risk seed capital to get going and we went from there.
Sramana Mitra: In 2006, you had at least these two customers live. How did the business progress from there on?
Brad Peters: From then, we had to turn that into something more scalable. The next thing we had to do was start hiring salespeople who could sell the product. It couldn’t just be myself, my co-founders, and a couple of other guys doing this. We had to turn it into a company. Based on that, we started hiring. We started building a pipeline or early stage customers. It was slow. These were long sell cycles. These early, big deals took a year to close. On the success of the first couple of deals, we raised a bit more venture capital. We raised a real round. That allowed us to hire a few folks and start to build a sales organization around that product set and approach many more financial services institutions. That was late 2006.
As we started to do that, we started to get some traction. Our goal was for every dollar of funding we raised, at least a dollar, if not two dollars of customer money in the process. We were able to hit that target. As we started doing that, we started getting some traction and we started to build the business. We started getting some big names in the pipeline and things started to move. In 2007, we landed another customer and some more in 2007. We were starting to build looking in the acceleration process. Then, we hit 2008. As you recall, 2008 wasn’t a great year for financial services.
Sramana Mitra: You’re still working purely on the use case of wealth management analytics?
Brad Peters: The business plan was do wealth management first. Then, do a number of verticals after another. Eventually, when we get enough verticals, we can go horizontal. So, we can sell a broad-based analytics solution. The idea was to find these deep rich veins in the analytics space – fund them one by one and do it at the enterprise level. Build a solution for the big guys that we could offer as a service and then ultimately, repeat it in many verticals.
We were just starting to move to insurance. We were trying to hire people to deal with that when all of the sudden in 2008, the crisis hit. We had deals with some major financial services that ultimately disappeared. I never would have thought at the starting of this company that we would have outlasted Merrill Lynch. As we started to see this happen in 2008, we could see that this model wasn’t going to work. We didn’t have sufficient velocity and run rate in that vertical to launch us to another vertical that was outside the financial services segment. Before what looked like to be a pretty decent storm, we had no idea how bad it was going to be, but it looked like something was coming. Banks were already pulling back in early 2008.