SM: Small companies do not have enough bandwidth to do anything themselves. That is why hosted solutions are so good for them.
JL: They also don’t do AdWord searches for solutions. We get our SMBs virally. We convert them at a higher rate than an enterprise because they immediately see the value. The great thing about SMBs is that the president, the head of sales and the general counsel are all the same person! Literally, the sales cycle for SMBs is 15 days. For enterprise customers it can be nine months.
SM: You had 8,000 customers at the end of 2008. What is your assessment of the speed at which this market is developing?
JL: When you are transitioning it takes longer than you would like, but in hindsight it happens quickly. I think it will take a minimum of five years before electronic contracting, of which electronic signatures is a part, is a primary way people do business. It will just take time. Digital photography took years. Today it feels stupid to take a roll of film in to be developed, but three years ago that was the norm.
SM: The Internet also helped with that.
JL: It did, but not in the way they thought at first. It is about social and sharing. Half of my engineers came from Ofoto. First generation was about printing. Our challenge is that we are trying to do both over five years. Our core workload today is based on the basic way people exchange contracts, which is Word to email. Our product is designed to be dead easy to use and works like email; pick who you want to send it to, select the recipients on the cc line, attach the contract, and you are done.
SM: What is the process of the signature? How do you capture it?
JL: Our goal is to make it easy. We do two things. About 90% of our customers sign in the browser, and is compliant with federal law. It is almost as simple as typing in your name and initials and signing it. You can sign in 30 seconds.
SM: You are not looking for the actual signature of the person?
JL: No. We look for the simplest thing that is legally binding. Having said that, as part of this transition we offer an option where if someone is not comfortable signing they can fax back the contract and it will then go through the same workflow. We just turn the fax into a PDF, store it, and make the necessary notifications.
Our core customers are signing routine stuff. We like the routine, boring, mundane, and the high volume. They have already more or less decided they want to buy three wireless lines from BT. They just want to close the deal. It is not about getting around the old process, it is just letting people sign it faster because they want to. We just want to make the contracting process as easy as a shopping cart.
The 2005 to 2008 transition is blending this fax and electronic signature. It turns out there is a very small minority who are not comfortable with electronic signatures. Where I think the transition will be over the next five years is that people won’t create contracts in Word and email. Everything will be dynamically created on the web. We allow some of that today. We have partnered with Zoho, which means you will never be on the desktop. In five years people will contract entirely electronically over the web. We want to automate those processes.
SM: What kind of financing did you need to get to 8,000 customers, and will you need more in the future?
JL: I hope we will not need any more. We raised our $2 million series A in 2005, which lasted until September 2007. By then we had enterprise customers. We then raised $5.5 million from Emergence and Storm, of which we have spent less than half. We have the majority of it in the bank. The allure of raising money is not so sexy and attractive, it is just a way to build a company. We will achieve sustained profitability with our current cash position. The way the economy is now, we will plan on letting that be the final stance.
SM: What is your pricing model?
JL: That depends on the edition. A SOHO will pay $13 a month for a very simple version of the product. Our enterprise edition is $30 a month per user. The average is about $25 a month per user.
SM: Great story. Hopefully things are going to move.