Sramana Mitra: How did you convince your first couple of customers to go with you?
Omer Artun: They were people whom I helped as a consultant. Once I built up trust with them, I told them I could do what this other vendor was doing for them much cheaper and better. That is how I received my first contract. Then I got several more and after that you have a story to tell, that you have been doing this for a year or two.
SM: This is another “tried and true” principle that we follow actively on 1M/1M. Going to customers in a consulting mode or in a service mode where you say you have expertise that you can bring to the table for them, you can do a custom solution for them, you understand their business, and you are going to be able to work with them in this mode. This way, there is both building of trust, and you also get to see the customer’s situation from up close. You really understand the customer’s problem on a deep level, which helps you to build a solution which is then going to solve that problem. There is of course a big benefit of working in that mode. How many customers do you have today?
OA: We have 35 customers right now.
SM: What is the average deal size of a customer? How much does an e-commerce company that wants to use your product have to budget?
OA: Our average price per year is about $200,000 for the software portion per customer. If they want services on top of that, it costs extra.
SM: What size are the companies that are usually going for your solutions?
OA: If the company is in a startup phase, we can go lower – for example, Fairview Revenue. But that is just for startup companies. For companies that are mature and making money, our minimum is between $15 million and $20 million. That is the absolute minimum. Our comfort zone starts within a $30 million to $40 million range.
SM: Going up to?
OA: The medium [amount] for the high end that we have is around $2 billion. The biggest one in terms of data that we have in our system is $100 billion.
SM: And when you get into a high-end business negotiation, are you competing with companies like IBM and Teradata?
OA: In some cases yes, in most cases, no.
SM: What is your estimate of the total available market for your business?
OA: This is based on our bottom-up approach in terms of how many companies are out there and how much they are spending to put together a solution like this. There market size is a total of $2 billion to $4 billion. That is what we have estimated.
SM: Is that an international assessment? That is a lot of software, by the way. I am slightly surprised by the number you quoted in terms of the bottom-up ten. I haven’t done the time analysis. Obviously you have; I assume you have supporting data for that. It just sounds a little high to me.
OA: I looked at how many consumer-facing companies there are in different industries in the U.S. I assume this to be roughly 40% to 50% of the market. For those companies that are in the range of what we are looking for – companies that are in the $25 million to $100 million range, [or] $100 million to $500 million or $500 million and above – and what our fees would be for those companies, we realize that we are replacing a bit of what they are spending on database licenses, data-clouding licenses or tap-in management licenses. This is based on what we charge our customers and based on what industries or different revenue groups we would be able to charge. If you have any internal data, such as cleansing, data warehousing, DI, or predictive efforts, our service replaces a lot of that as well.
SM:I love this kind of technology, and I think, at a broader scale, this kind of technology and these kinds of efforts have happened at the very high end with very expensive solutions. But being able to bring some of that into the mid-market is very interesting. And it is great to see that these sophisticated technologies are finally having deeper penetration into the broader market.
OA: I picked the mid-market because it has the skill but not the expertise. At Best Buy we had a 50% customer inside team, with millions and millions of dollars spent on Teradata and others. If you are a $200 million company, you are at scale. A $200 million consumer-facing company probably spends 20% to 30% of its gross margin on marketing. That means the company spends around 6% to 10% of revenue on marketing. That is a significant amount of money. Improving that by 10% or 15% is around $5 million to $10 million to the bottom line. It is a business that has some scale.
These companies might have 5 to 10 people in the marketing departments. They are not going to hire a technician or buy a $500,000 a year [IBM] Unica. Their IT department is more focused on running the network than on doing complicated installations and maintaining applications. So, this is a perfect solution for them. It is almost like the data find system in the cloud, which gives them the ability to cut through the noise. In my opinion, the big data or the solution we bring is all about cutting through the noise. The data has increased 100-fold, but the information on that data is t times 3x. That means that when looking at 100% information, you get 3% of [that] information. What we try to do is sift through that noise, because there is so much noise in the data.
SM: This has been a very interesting story. Good luck to you.
OA: Thank you.