SM: What has been your financing history? Did you finance this yourself at the beginning?
JJ: I bootstrapped it a little bit. I recruited Rob Bradshaw out of Interwoven to join me. Scott Brave was the other person with me initially, and he came out of Stanford. I did not need a lot of funding at the time.
When I realized that I needed to pay people, meaning that I wanted to go full steam, I decided not to use my own money. If I used my own money I would have gotten too emotional. One I had a full team of six people I decided to raise a round. I went first to JK&B then to Hummer Winblad. That was the fastest fundraising I have done. It was one dinner and technical due diligence in my car over the phone.
SM: How much did you raise?
JJ: I raised $4.5 million from JK&B and Hummer Winblad together. That was the first round, which was in 2005. The company operations officially started April 1, and we already had the prototype. We had a few prospects lined up as well. There were a lot of local companies willing to work with us.
Two years later we did another unsolicited round of funding with Disney’s Steamboat Ventures. Disney was a strategic investor, and that was very valuable to us. They were able to get us into a lot of places that would otherwise be unavailable. That was a $10 million round. That is the total funding that we have raised, and we still have the money in cash.
SM: Do you already have revenue?
JJ: We have significant revenue. We are pretty much already in a profitable state. Some months are profitable and others are not. We don’t want to be too profitable because we want to grow faster. We are balancing that piece.
SM: Beyond the founding team, what were the key milestones of team building?
JJ: For the VP of engineering I used Christopher Minson, who used to work for me at Interwoven. He was a real go-getter, go-doer. He was perfect. He built the initial product for me. I did not write a single line of code for Baynote. Everyone I hired was somebody whom I knew. I did not hire anybody from the street.
SM: What about the sales side?
JJ: That did not happen until much later. The founding team did the initial sales for the first seven to ten customers. The first sales executive came out of LinkedIn. It was accidental and was not somebody that I knew.
We have a very high hiring standard called the A-Squared Principle. Basically each individual must score two A’s on talent. A sales guy has to be a great sales guy, a great engineer has to be a great engineer. The second A is a team player. Everyone must work well together. Even with that high standard, when we hire people whom we do not know off the street, 50% of them do not work out.
SM: Hiring is one of the hardest things to do. Within a very short time you are trying to assess a person, but a person has a complex history.
JJ: Very true. You can work with someone for a week and know if he or she will work out or not. In an interview situation, some people are good at acting while others hide. I have learned how to flush people out after the interview is done. A lot of people put their guards down. They think that the interview is done and the true face, the team player part, becomes more obvious.
SM: What else should I have asked that I did not?
JJ: I do want to point out that I was very nervous doing a startup for a third time. I was not expecting that. I was puzzled by why I was so nervous and scared. I had the funding, the team, the science, and no personal financial worries, yet I was still nervous.
I have come to realize that the moment of despair is profoundly important for entrepreneurship. It was my source of innovation. It makes your breakthroughs happen many, many times.
SM: What was the source of the paranoia in the first place?
JJ: It is human biology. It is anti-human to leave the village. Every entrepreneur needs to know that. If you can overcome this and transfer that energy into innovation, you can make it. For me, getting back to exercising was very helpful.
SM: Great story. I think that AI is, by and large, an unleveraged field of computer science as far as commercialization is concerned.