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Bootstrap First to Exit, Bootstrap Again, Then Raise VC Money ALL from St. Louis: Stephanie Leffler, CEO of OneSpace (Part 7)

Posted on Sunday, Jul 31st 2016

Sramana Mitra: As I’m listening to you, I’m thinking that last year, you did over $10 million with 50 customers. I can see that business model going to $40 million to $50 million in the next three years. You’ve told me that you’re switching business models, and your focus is going to be on the SaaS business.

Deal sizes are not going to be of scale. You’re selling software, so your average sales price is going to be a lot lower. The number of customers that you have to acquire is way larger, and people are not searching for freelance workforce management software. You have to find these customers somehow. How do you reconcile that?

Stephanie Leffler: The first thing is, from a price standpoint, I definitely recognize that a lot of SaaS platforms are relatively inexpensive. We have a slightly higher price point for our software because of the value that it does deliver. A customer who subscribes will be paying, at least, $100,000 for our entry-level package. In order for you to be a customer of ours, it’s pretty difficult.

We have to know every single detail about the work we’re going to be doing because we have to give you a per unit price. In a big company, those requirements are often always evolving. It takes a lot for us to do a new deal with a customer. Every day, our 50 customers call us and say, “We want to test all these things.” One of the huge advantages of on-demand workforce is the fact that you can turn it off and on at will. We don’t offer that to our customers today.

Even if a customer has a big project running on managed services, all the value of our product starts to come in when you are able to conceptualize an idea, launch it on a Friday afternoon, and have people who are excited about it submitting work by Sunday. You actually have the makings of a new product within a company so quickly. We don’t offer companies that number one advantage today. That holds us back from scaling.

I think if we start to put our software in the hands of the users and let them test things, the number of concepts that get tested goes up and the number of successful ones goes up. The spend on the platform is going to be massive. We take a transaction fee on the spend plus our subscription fee. It’s a gamble. I feel strongly that, ultimately, we’ll see contribution to our bottom line from our software product exceed our managed services business in the next 18 months. I think it can happen even faster than that.

Sramana Mitra: Good luck.

Stephanie Leffler: As an entrepreneur, you have to say this stuff with authority. Don’t get me wrong. I spend a little bit of time every single time wondering about that question. I know I’m speaking to somebody who knows what they’re doing, so I’ll lay it out there that I’ve made my bet at this point.

Sramana Mitra: That’s what entrepreneurship is all about. You make a bet and see if it works.

Stephanie Leffler: Exactly.

Sramana Mitra: One final question. What has been your experience being a technology industry entrepreneur, first bootstrapped and then in a venture-funded mode, as a woman? Do you face any kind of push back or discrimination?

Stephanie Leffler: I have to say I don’t feel as though I have.

Sramana Mitra: That’s good because I don’t either.

Stephanie Leffler: If anything, I guess I felt a little bit as if it’s an advantage because a lot of times, people are slightly surprised by it. All you’re trying to do in the business world is pique people’s interest enough that they’re willing to give you one second of their time. Honestly, most of my executive are women not by design at all. I have people ask me this a lot because we stand out as a company with so many female executives in the software space. If you ask any one of the women in our team, I don’t think any of us have felt any discrimination at all.

Sramana Mitra: What is the role of doing this company out of St. Louis? What are you experiencing?

Stephanie Leffler: The pros are easy for me to articulate. The cost structure obviously. The second is the loyalty I get with my team. I’ve got 15 from Monster Commerce. We just don’t have the turnover that the coast sees with team members. There aren’t new shiny objects everywhere and people don’t get distracted as easily. On the cons, I would say proximity to customers.

I think somehow, when people find out that you’re not located in Silicon Valley or New York, there might be a slight perception that your product or company is somewhat lesser. I don’t really have any evidence that’s real. The one thing that I can tell you from an investor standpoint is that I did have investors say, point blank, “I really think what you’re doing is interesting, but I’m definitely not coming to St. Louis.”

Sramana Mitra: Where are most of your customers?

Stephanie Leffler: Primarily our customers are in the Northeast and the West Coast. Those are the big ones.

Sramana Mitra: Keep in touch. I’ll follow your story.

This segment is part 7 in the series : Bootstrap First to Exit, Bootstrap Again, Then Raise VC Money ALL from St. Louis: Stephanie Leffler, CEO of OneSpace
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