Sramana: What was your motivation for contracting your technical offerings down from seven analytics engines into your current offering?
Dean Stoecker: We realized that we could not scale the company with a bunch of sales people. We certainly could not scale in terms of marketing if we had to pitch seven different analysis engines. Instead, we focused on shortening sales cycles and in improving our on-boarding process for new customers so that they could see value in a very short period. It was untenable having a bunch of standalone tools. We built the first rollout of the Alteryx we sell today in January of 2006.
Sramana: How did you manage the financial engineering of the business?
Dean Stoecker: We started the business with family funds, and I think that is the best way to start a business. If you don’t treat other people’s money like it is your own, then bad things happen.
Sramana: Most of the time you do not have an idea that you can sell to VCs or institutional investors. Friends and family are much more willing to support you, because they want you to succeed. That is why it is the most successful and common form of angel investment.
Dean Stoecker: I did not want to have family as investors, so the founders put up their own money. I only took a loan one time from a family member and I did that at market interest rates. I did not want bad blood if things didn’t work out.
Sramana: Young entrepreneurs probably don’t have savings so they need to get it via friends and family or from institutional investors. It is nice for them to have access to funds to build a business that an institutional investor can partner with later.
Dean Stoecker: I did take a Series A investment about 18 months ago.
Sramana: That is interesting. We have seen entrepreneurs delay raising money, because they were able to get better valuations. What was that process like for you?
Dean Stoecker: That process was very interesting. It shows the risk taking that the owners are willing to go through. I knew that we had to go out and get money because we were entering a space that was more sophisticated and that we needed to have resources to defend our turf as well as grow. We decided to go into the BI and analytics world. After 14 years of non-stop profitability and $10 million in the bank, we decided to raise money because we needed guidance, support, and assistance navigating the bigger ecosystem.
Sramana: How did you go about raising the funds? A typical Series A is not at the valuation level you were operating at. A typical Series A VC firm would not invest in a firm as established as yours.
Dean Stoecker: I knew the fundraising would be easier at this level although I did get some interesting grins. I had guidance from Thomson Reuters who convinced me to go raise the money. In the tech world, slow growth is slow death. He was right, but the risk of being taken out by a smaller, nimbler player with lots of resources is always at the back of my mind.
I had an opportunity to speak at an investor conference. I gave an elevator pitch at Half Moon Bay in 2009. After a five minute pitch, we had three term sheets from established investors. We ended up taking money from SAP Ventures.