Sramana Mitra: What did you do in terms of going and trying to recruit the next set of projects? Did you then go out to find projects that are in line with those people’s expertise?
Ray Grainger: We decided to take a different path. The thousand people told us, “We really like your concept. It’s much bolder and broader than anything we’ve ever seen. What we’re used to is BaseCamp and then FreshBooks to do invoices.” They had 8 to 10 different tools and they couldn’t tell how their business was performing and they wanted it all in a single place. We set off to build the depth. We built the very specific depth that these companies needed. In order to recruit the service providers, we marketed to them with this fantastic toolset to run their whole business.
Sramana Mitra: You basically gave them the platform on which to run their business and have them bring their clients on to this platform.
Ray Grainger: Bingo. Clients and subcontractors. They helped build all these mini-nodes. Let’s say they had 5 or 10 employees. That spurred a little bit of referral type of ads beyond that to introduce Mavenlink to a broader audience. The other thing that was instrumental that helped scale a lot it is that once we had this platform and we knew our target, we then teamed up with Google. They were getting ready to help companies like ours if we incorporated Google Apps into our product.
You didn’t have to be a Google user but if you did, we organized your Google life. We said, “Okay. Let’s do that. Then we’re doing to promote to a marketplace for free.” We launched in the Google Apps marketplace in March of 2010 and within six months, became the top installed app across every category in the world. It just went crazy. That was free traffic mostly supporting the small to medium businesses that were adopting the Google Apps.
Sramana Mitra: Interesting. I remember that period. We had companies in our portfolio that were using that strategy as well. That’s a considerable amount of software development that you needed to do to fulfil the desires of your service providers. How did you finance all that?
Ray Grainger: I mentioned that we had teamed with Pivotal Labs early on. Because we were really in the depths of the recession, they gave us an incredible deal. We got about 50% discount on their normal rates. Additionally, the venture capital market got very difficult in 2009. We tapped into a very strong network of current and former Accenture partners who had been with me at my IPO who I knew had the ability to help invest. We raised a million dollars in convertible notes through our own private network. That kept getting us further along. I ended up putting additional money in. We actually had about $3 million that got us through that dry period.
Sramana Mitra: Were you generating revenues at this point?
Ray Grainger: We started generating revenues in January 2010. MVP, testing, revalidating, and focusing was one year. In January 2010, we had plans. We were connected with the ability to accept credit card payments. It was slow-going because we were still a freemium model at that time. We thought that the base would be gigantic. We convert 2% to 4% and that would be sufficient. We ran a freemium type of model for about a year and a half.
Sramana Mitra: What does that mean? Some people get to do some portion of the project for free?
Ray Grainger: That’s correct. We had a limited feature set that they could use on a free basis. Then if they wanted to do other higher-value add transaction like invoicing, they had to upgrade to our paid plans.
Sramana Mitra: Talk to me about the business model then? It sounds like service providers are paying for the subscription.
Ray Grainger: The first thing was to build a set of tools for service providers to run their business. They would then invite their employees, clients, and subcontractors. These are known networks. We didn’t provide a facility for them to expand their networks. They invited people in their own networks. We put the network as a secondary longer-term horizon part of the business. We focused on this platform to actually run their business essentially sitting in between CRM system and QuickBooks. Everything in between was run on Mavenlink. That’s the platform we created for the services industry.
Sramana Mitra: How much were you charging for that?
Ray Grainger: For the paid version, at that time, it was really cheap at $351 a year for three users. Today, it would be about $450 a year per single user.
Sramana Mitra: 2010 was your first revenue-generating year. How did you do in 2010? How many paying customers did you have?
Ray Grainger: Very few. We had lots of free ones though. We had a lot of success with people trying and testing the platform. It was at least 150,000. On the paying side, we probably had about 2,500 paying users.
Sramana Mitra: What was your annual revenue rate for 2010?
Ray Grainger: I don’t recall at the top of my head but it would have been in the low few hundred thousand range.