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Building a Fat Startup: Apptio CEO Sunny Gupta (Part 7)

Posted on Wednesday, Jun 11th 2014

Sramana Mitra: As long as you are delivering and executing on what you said you were going to deliver on, there is no shortage of capital. In your case, you have delivered a product. You’ve had customers. Your pricing model is validated. Your business model is validated. You’re ramping up well. These kinds of deals generally do not face any shortage of capital.

Sunny Gupta: From my perspective, you’re absolutely right. Over-delivering based on what I’ve told them I’m going to deliver has opened up more opportunities. At some stage, we did move more into a hyper-aggressive growth. We’ve been very capital-efficient but there was capital at our disposal. Whether it’s ramping our sales capacity, investing in more product capabilities, or marketing capabilities, we’ve been fortunate from that perspective to ramp ahead of the curve.

What I’ve learned through the years is that the technology businesses change at such a rapid pace and innovation is happening at such a fast pace that I believe – in my humble opinion, I’m not suggesting that you start a business that way – for you to become a breakout and be one of those billion dollar companies, you have to think big and play big. The only way you can do that is by executing. In the first round, you can say that I got lucky because I had investors who trusted in me.  I would say that every other round thereafter, I’ve earned it. I’ve earned it by execution. By the way, we’ve always had a very big vision. We feel that our addressable market is massive.

Sramana Mitra: What you said is absolutely correct. The vast majority of companies that we deal with are first time entrepreneurs or, at least, entrepreneurs who don’t have huge amounts of success behind them such that they can walk into VCs who have made money of them before and are willing to fund them again. The fat startup model actually only works if you have a track record and somebody is willing to fund you and your credibility. Outside of that, by large the fat startup doesn’t work. There are some exemptions. Especially in infrastructure, it happens a little bit more.

Today’s market is very difficult to navigate for first time entrepreneurs to do a fat startup. In your case, you’re absolutely right. In the first round, you raised on your credibility. It sounds like you also delivered a powerful market validation in the first round itself. It’s not like you were only going into the fundraising with your credibility. You went in with real market data.

Sunny Gupta: Exactly. I would say after the first round, I would not be treated any differently.

Sramana Mitra: If you’re business is not performing, you would not be treated any differently. You would have difficulty raising money whether you have track record or not.

Sunny Gupta: Correct.

Sramana Mitra: Anything else that you want to discuss?

Sunny Gupta: There are two things I wanted to mention at a high level. One is when we started the business, and it’s still true now, it was as important to me to build an incredible culture. I always said, “When the story book is written on Apptio, we want this to be as much about the category and changing the way IT runs itself as well as the culture that we are building in the company and the values.” I felt like I’m raising my children. I want my people to live a certain way. I want a certain class of individual who can make Apptio an exception. That’s an area where we’ve invested heavily in. We documented our values. We pride ourselves in building the company that way.

The last thing I would say is about the morphing of the business in 2008 to 2009. It started to become clear to me in the last two years. Let me discuss to you the three phases of Apptio. The first phase was establishing a market and selling a product or service which customers are paying money for. Is it a market category called technology business management? Can I get hundreds of customers to buy into that and get value? We feel like we’ve done that. We are past that phase in Apptio. The second phase is where I’m at, which is all about what I’m doing for a few hundred customers. How do I do that more pervasively across thousands of customers from different geographies and different verticals.

Sramana Mitra: Where are you in terms of revenues?

Sunny Gupta: In the first phase, we had a run rate of $100 million. The second phase, I think, is half a billion to three quarters of a billion.

Sramana Mitra: You’re in the beginnings of the second phase right now?

Sunny Gupta: Yes. We are taking the company to the next level. How do we get to do different geographies and different sizes? The third phase is something which we’ve learned. We are continuously validating with the customer even today where customers are starting to say, “Whatever I’m doing with Apptio in the IT space, I want to also extend Apptio to use in other functions in the enterprise.”  The same issues that exist in IT, exists in other parts of the organization.

The reason I’m just mentioning that to you is from my perspective, the innovation and entrepreneurship does not stop at the first element of the company. When I wake up every single day, I feel like it’s the first day of Apptio. The best growth story is ahead of us. We can become one of the most important companies of the modern enterprise era. That’s how we are innovating the business through the next core phases. With each phase, there comes a lot of change within the organization around the people.

Sramana Mitra: Excellent. Great execution and good luck with the next phase.

This segment is part 7 in the series : Building a Fat Startup: Apptio CEO Sunny Gupta
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