A Serial Entrepreneur’s Awesome Journey from Austin, Texas: Jason Cohen, CTO of WP Engine (Part 7)

Sramana Mitra: What were the financing rounds? You raised your first financing within 18 months when you were getting real traction so you did bootstrap the first phase.

Jason Cohen: Right. In August of 2011, we raised our first little A round. Then a year later in the same month, we did a B round. Then, we more publicly raised a C and a C1 round in January 2014 and January 2015, respectively.

Sramana Mitra: January 2015 financing round means you’re in the middle of the Unicorn bubble. Valuations are really running high. What was your experience in raising that round?

Jason Cohen: We didn’t do that. I think it’s a big mistake to optimize the valuation and not the optionality of what happens next. It’s tempting just to think not to be diluted too much. Plus, there’s an ego component to having a high valuation. We can understand that, but it’s not fiscally prudent. To get to the next step, whatever that means, when you’ve oversold your valuation, you have a big hop to come over.

First, you have to grow on to the valuation that you said you were but really aren’t. Then you have to grow sufficiently past that to justify whatever happens next. You have to overachieve what you thought you’re going to achieve. You probably already had ambitious plans that are hard to achieve. Now, you’re double behind. That happens to a lot of companies. Of course, we now see that happen a lot in the Unicorns who have to layoff a lot of people and do bad rounds with terrible terms. Also, a lot of people who took those great valuations did so on bad terms.

Sramana Mitra: Really bad terms.

Jason Cohen: What they think is a good dilution situation is not so. It’s only true in an extremely good upside like where they overachieve their own ambitious goals, but that is a ridiculous place to put yourself as an entrepreneur.

Sramana Mitra: The problem that we’re seeing in the industry is that people are caught up with valuation much more than they ought to be. They are not enough caught up with the revenues and unit economics. That’s the problem.

Jason Cohen: Right. We did not make that mistake. What we did is say, “What is historically prudent given our growth rate, margins, and profitability?” We didn’t over reach ever. We never took on strange terms. In fact, most of our term sheets simply say, “The same terms as the last round except this valuation and this number of shares.”

Sramana Mitra: Did you raise money in Austin or Silicon Valley?

Jason Cohen: Our first two small rounds were in Austin from Silverton Ventures. Then our two growth rounds were from Northbridge Partners in Boston. They’re in Silicon Valley as well. The San Francisco one is their venture fund but we’re out of their growth fund, which is out of Boston.

Sramana Mitra: How many customers do you have now?

Jason Cohen: 50,000.

Sramana Mitra: Jason, this has been a fabulous interview. I thoroughly enjoyed it and love the way you tell your story and insert the lessons.

Jason Cohen: One thing we didn’t cover is that in 2009 when I was on my hiatus, Joshua Baer started Capital Factory, which is a local incubator. He calls us co-founders but I feel like it’s really his vision and his action. We helped a lot. In any case, there was a small number of us who helped start that. I’ve been a mentor and an investor in all of the years of cohorts that we had. That’s another reason why I have some perspectives. You learn the most by doing, but you also learn by helping.

Sramana Mitra: You learn a lot by teaching, yes. There are three levels of learning. You learn by reading. Then you learn by doing. Then, if you can actually teach it to other people, that’s a whole different level of learning.

Jason Cohen: Right. Between blogging regularly about these subjects and personally investing and helping new entrepreneurs for the last six years, as well as remaining an entrepreneur myself, that’s how I continue to learn and that’s why I can articulate things.

Sramana Mitra: Great! Thank your for your time.

This segment is part 7 in the series : A Serial Entrepreneur’s Awesome Journey from Austin, Texas: Jason Cohen, CTO of WP Engine
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