Sramana Mitra: That’s not necessarily the only kind of companies that VCs back. VCs also back enterprise software that delivers that kind of growth. In fact, I would say the IT industry’s bread and butter success have been from enterprise software – not from consumer software.
Eric Burns: I guess the thing that may have stood out to some of these VCs is that our renewal rate was extremely high at 93%. When you have a SaaS business and you’re getting that revenue again every year and you devote the new spillover to new customer acquisition, you have a nice virtuous cycle.
Sramana Mitra: You are located in Pittsburgh?
Eric Burns: Carnegie-Melon is in Pittsburgh. Initially, the division of company leadership was between Seattle and Pittsburgh. I left Microsoft in 2007 having relocated with a fresh network of eager software engineers in Seattle. I said, “Let’s give this a shot and try distributing the company. We’ll do the engineering office here.” Over time, we’ve ended up becoming the largest office.
Sramana Mitra: Where are the VCs located?
Eric Burns: They’re all over. There are a couple at Saturn Ventures at Boston. The Series B group was led by Mountain Capital Group in Nashville, Tennessee.
Sramana Mitra: That’s the other thing. You are off-center in terms of the VCs that you work with as well. If you were working with Silicon Valley VCs, they would not buy the story. I think you did a very smart thing by going to VCs who do not have high-quality deal flow. People in Tennessee don’t necessarily see a lot of fast-growth companies. Oftentimes, going to those kinds of sources for money give you more leverage as a credible company that is delivering revenues and growth – not just growth and scale that a high-end Silicon Valley VC would be looking for.
Eric Burns: Because we, at that point, had reached cash flow positive, we were able to be picky. We kept shopping not until we found somebody who would write a check. We found plenty of those. But until we found somebody who understood the story and believed in it – not just look at the fundamentals and growth rate.
Sramana Mitra: You raised how much in Series B?
Eric Burns: $4 million.
Sramana Mitra: $4 million in 2011. Have you raised more money beyond that?
Eric Burns: We’ve done a little bit here and there when we found that the market would offer us the rates we wanted. It’s always been on our timetable. The capital efficiency discipline that we’ve built in to the company has served us very well. We continue to out-execute technically our competitors. We see this as a long game – not one where you go and bring in $15 million, spend it in two years, and go back.
Sramana Mitra: My bottom line question is, is there a Series C in the project?
Eric Burns: We haven’t yet raised Series C but we’re open to that.
Sramana Mitra: So you’ve topped off the Series B with bits and pieces of money on the same terms or maybe bridge terms?
Eric Burns: Yes, we’ve done some convertible notes basically.
Sramana Mitra: So far the money that has gone into the company is a little over $6 million.
Eric Burns: It looks like if you add it all up, it’s around $8 million.
Sramana Mitra: We’ve talked about until 2011. Are there any other major strategic moves that you made after the Series B?
Eric Burns: I think there are three strategic moves on the back of Series B. The first one was we created a dedicated enterprise sales team pursuing Fortune 1000 knowledge industry companies – anywhere where training and on-boarding was a big concern and where there was an opportunity to do classroom capture.
Sramana Mitra: These are your HR training organizations.
Eric Burns: We went after that because it was a natural fit for the tech but we discovered that it was a much bigger and more complex market than we thought. The second is that we realized that we had a great lecture capture technology and a great library behind it for searching and delivering content but we were ignoring this opportunity to take content that we didn’t capture and bring it into the same library and apply our search technology into it. We entered the VCMS space as a pure play VCMS using technology we had already built for lecture capture, but allowing people to upload their own media to it. That was the second biggest investment.
The third one was to open an international office, initially in the UK and then last year in Hong Kong. We began to capitalize in some of the demands for lecture capture tech, which actually is even more extreme in United Kingdom. We’ve been very successful to the extent that we took over the country of Wales. If you’re attending a university in Wales and there’s lecture capture, you’re using Panopto. We found a wide open market there and we’re very glad we did because the UK office was able to grow in parallel with the US office. We hope to repeat that effort with the new office we opened in Hong Kong last year.
Sramana Mitra: With these strategic moves, what is your growth curve showing right now?
Eric Burns: More of the same. More of the same implies that the company is doubling every two years or faster. Now the numbers are getting bigger so that’s not a growth curve we’re too unhappy with. They don’t actually have a name for what we do. We see so much potential in that market. We see continuing demand from higher education and also the disruption of existing players that there is reason to believe that we’re now at that stage of a company where the only thing you have to focus on is execution of scaling your business as opposed to finding your market, product, price plant, or licensing model. We have those and now we focus on execution. That’s reason to believe the curve could come up a little bit.
Sramana Mitra: You’ve found all of your use cases. It’s a question of building a solid sales funnel and executing on the sales side is your real challenge at this point.
Eric Burns: That’s right. It’s a very high-class problem to have.
Sramana Mitra: Good luck with everything going forward. Thank you for your time.