Sramana Mitra: How did you go around that problem?
John Sundberg: We took the product and we broke it up into a whole bunch of smaller pieces. That big suite application had a survey application, scheduling application, workflow application, and form generation system. We broke them into smaller pieces so that we could then add in a complementary way. They had their existing pieces and it’s easier for us to sell a survey capability to add to their existing system. We effectively made a whole bunch of applications that were add-on in nature rather than core in nature.
Sramana Mitra: They were buying pieces and bundling it together on their end?
John Sundberg: Yes. They would take our pieces and replace some processes like the scheduling or feedback process. They would use our software for those things so that they wouldn’t have to do a full-on replacement. We built a full-on replacement for everything but that was too risky for the company to do.
Sramana Mitra: How did you price these bite-sized pieces?
John Sundberg: We typically price them by the number of servers that they were using to support the module that we were building. For smaller organizations, we’d have one or two servers. A larger organization would have 8 to 12. We were avoiding the per user cost model by doing a per server model for a few reasons. One, people didn’t like per user. Two is, it’s hard to calculate per user.
The larger the organization, the more servers they have. The smaller the organization, the less servers they had. It’s an indirect way to price by user.
Sramana Mitra: How did that scale? When did you first bring these modules to market?
John Sundberg: 2004.
Sramana Mitra: How much were you able to do in terms of revenues in 2004 and how did that ramp?
John Sundberg: Probably $100,000 roughly in 2004.
Sramana Mitra: That is across how many customers?
John Sundberg: Five.
Sramana Mitra: So you had five customers and $100,000 in revenue. All your assumptions were validating reasonably well at that point.
John Sundberg: When I first built the Kinetic survey application, this was when Google AdWords first came out. I put a Google Ad in on Saturday night. On Monday morning, I got a call from Intel.
Sramana Mitra: What ad did you fit in?
John Sundberg: Kinetic survey. Make your Remedy surveys make a business change or something along those lines.
Sramana Mitra: It wasn’t a PPC ad? It was a display ad?
John Sundberg: You know how you search for something and you get the ads on the right-hand side.
Sramana Mitra: Pay-per-click ads.
John Sundberg: Five cents.
Sramana Mitra: What keywords did you position against?
John Sundberg: Remedy, which was an IT system.
Sramana Mitra: You put in an ad and you got a call from Intel.
John Sundberg: Two days later. My heart was pounding. It was awesome.
Sramana Mitra: Five customers is actually good. What are the sizes of customers in that first pool of revenue?
John Sundberg: The very first one was a company called Retech.
Sramana Mitra: The one that Oracle bought later.
John Sundberg: Yes, Oracle bought them about three months after they bought our software. Scholastic, Book Place, University of North Texas, and Intuit. I don’t know the exact first five.
Sramana Mitra: That’s fine. There were large significant companies.
John Sundberg: Every one of our customers is large.
Sramana Mitra: How does the ramp then happen in the next year? In 2005, how many customers did you have and what’s the revenue size?
John Sundberg: Probably $250,000 or so the next year for that particular product. I find this interesting. Intel called me two days later. I think they took nine months to buy. They probably were a $50,000 purchase or something like that. It wasn’t a massive amount of money.