Sramana Mitra: For those of you who don’t know the history of WebEx, the company went public and was eventually acquired by Cisco. It was a very successful story. It was one of the first two cloud companies in the history of the business. I want to get to Salesforce, but let me actually first get to Tableau because it’s a more contemporary company.
I’ve written about Tableau quite a lot recently. My understanding of Tableau was by the time they came to NEA for their funding, the company not only had customers and revenues, but it also had done an interesting OEM deal with Hyperion. Tell us a bit about what you saw in Tableau. It seems like an incredibly capital efficient company that generated immense return on investment.
Scott Sandell: As far as I know, Tableau is probably the most extraordinary company in modern history in terms of capital efficiency. We invested $5 million in the summer of 2004. The founders of this company were Christ Stolte, Pat Hanrahan, and Christian Chabot. Pat is a professor at Stanford and was Chris’ thesis advisor and has been the co-creator and shepherd to a number of successful companies. Chris had co-founded a company with Christian and it had been sold to Vicinity, providing a modest amount of liquidity which enabled them to bootstrap Tableau.
To be clear, this was not a situation where they had huge amounts of money and could enjoy whatever lifestyle they wanted. They explicitly decided to downgrade their lifestyle. They moved to Seattle, which was cheaper than the Bay Area. They had other reasons to move there as well. In the early days, the company was run out of their garage. By the time they got to us, they had an OEM deal with Hyperion, which was later sold to Oracle. It lasted them about four years and provided about $1.5 million in revenue. There was a fair amount of engineering effort to support that OEM contract.
Nevertheless, it provided some early fuel, which meant that when we came along, they were able to raise money at a time when valuations were in the single-digits for Series A. 2004 was not an easy time to raise money especially for, what was then, a Windows desktop software application being sold for a couple of thousand dollar a seat. There was no obvious way to sell it profitably. They had to invent an entire model.
Nevertheless, we invested $5 million at a $20 million valuation, which was considered lofty at that time. It enabled the founders to retain a huge stake in the company. We ended up investing in some subsequent rounds to provide more of a balance sheet for the company than anything. The important point is that they never used more than $1.7 million of the original $5 million to build the business.
Sramana Mitra: The reason I love this story is that’s really the philosophy that we are trying to espouse in One Million by One Million. It’s this notion of bootstrapped, capital-efficient entrepreneurship and the philosophy of bootstrap first, raise money later.
A lot of what we call infant entrepreneur mortality happens when you get up in the morning and decide you want to be an entrepreneur, and then you decide the next thing you want to do is hit up some VCs. This is not the way to build companies. With a lot of case studies and input from very experienced entrepreneurs, we have been able to make this point.
The other thing that entrepreneurs around the world are facing is a tremendous problem with the media. The media likes to cover these companies. They’re not going to write about companies that are not funded and are bootstrapping. Right from the beginning, the media platform that we have built have maintained as a principle that we will support companies that have customers and revenues. Profit, maybe or maybe not. If you’re bootstrapping, you have to have some profits to be able to sustain. We don’t require financing to be part of the equation.
As a result, we have been able to identify and bring to light a lot of companies that nobody wrote about. We had a show where the CEO of Pluralsight was a guest. When I met Pluralsight, nobody had written about them. They were a little company from Utah. If you look in there, it was not a little company. They were doing $12 million in revenue. It’s in the online education space. They have all sorts of content. After we wrote about them sometime not too far from then, they started raising money.
Today, they’re a unicorn company. They have raised $130 million. They have acquired several companies. This principle of building value, building customers, and building some amount of revenue reinforces this point that has come up over and over again in our work. We’ve touched over 5,000 companies over the last 10 years. Over 350 of those have emerged as highly valued companies and over 40 unicorns already.
There are a lot of highly valued companies in our coverage that will emerge as unicorns, I believe. We have now heard from a very large number of entrepreneurs and their techniques. We’ve heard from investors and a lot of them have reinforced this point.