Sramana Mitra: What was your financing strategy for Neolane? You said that the founders bootstrapped the company. Have you taken on any institutional investment to date?
Stephan Dietrich: We started with our own money. We knew that with the dot-com crash it would be very difficult to get funding. Our team was not intimidated by the downturn; in fact, we like it. Our first company was founded in 1991, and that was not a great year. The second company, started in 2001, involved 9/11 and the second war in Iraq. It was a horrible environment, but it was an opportunity to get every bit of value out of each dollar. It makes you strong and more prepared for when the tough times end.
We were looking for money because we did not want to fund the company indefinitely out of our own pockets. One of the VCs who made a lot of money out of us the first time told us that he did not believe in the Neolane story but that he did feel our team was very strong. He felt we would find another product if our initial one was not viable. He gave us $2 million dollars and told us to spend it wisely.
Sramana Mitra: How long did the $2 million that you raised in 2002 last?
Stephan Dietrich: We are running off it today. We had funded it ourselves and we raised $2 million. From there, revenues have carried the company.
Sramana Mitra: You have turned $2 million dollars into a $44 million company. That is a very capital-efficient story.
Stephan Dietrich: That is what people love about us. We took that $2 million through December 2006. We knew from the get-go that we would need more capital to go into the U.S. market. We knew that the ultimate marketplace for enterprise software and marketing solutions is the U.S. When you look at marketing spend per GDP, the U.S. comes in first by far. You don’t need case studies and PhDs to realize that you need to enter the U.S.
We were at $8 million in revenue. We were doing our first international sales in Belgium in 2003. We opened a subsidiary in the U.K., which was a good test bed to make sure the teams were ready to go international. We opened that office in 2005. We opened an office in Copenhagen for the Nordic countries. In December 2006 we felt ready to enter the U.S. market. To facilitate that next step, we raised $8 million.
Sramana Mitra: In 2006 when you went to raise financing, what did you tell your investors? This is a crowded space, particularly in the U.S. What did your investors think the opportunity was?
Stephan Dietrich: They looked at the vision of the team from day one and how the team had executed over the past five years. They looked at how efficient we were at delivering and executing our plan over that time. That gave them a strong comfort level. They realized it was ambitious to go after the U.S. market, and they felt confident in our team.
Sramana Mitra: Sophisticated investors look at the market and its dynamics. I can tell you that if you talked to investors in Silicon Valley about internet marketing in 2006, it would not have been an easy sell.
Stephan Dietrich: We have our product differentiators. Europe was very competitive. We had the same players, and the markets are smaller. Unica had acquired a company in France. We knew that the market would become digital and our DNA was entirely digital. None of our competitors had that. We knew that conversational, two-way marketing dialogue was something we had that nobody else had.