Sramana Mitra: What did you do in terms of getting OnShape off the ground? Did you raise venture money? From whom?
Jon Hirschtick: I got a founding team together. Guess who’s on the founding team? Tommy and Dave. The guy who had supervised me in ‘81 and had been my SolidWorks co-founder had bought me out in ‘91 co-founds OnShape with me.
We put the whole band together. Money was super easy to raise. Everyone in town wanted to invest. We raised $9 million in a day. People were excited. They loved the idea. Little did I know that $9 million would not be nearly enough. NEA and Harry Weller showed up.
Sramana Mitra: NEA was my investor in one of my companies.
Jon Hirschtick: Did you know Harry Weller?
Sramana Mitra: I don’t. I worked with Mark Perry and Scott Sandell.
Jon Hirschtick: What a great guy.
Sramana Mitra: I got Mark Perry to invest in Think Three when I worked with Joe.
Jon Hirschtick: It’s a tough market. Harry shows up and says, “You’re going to need a lot more money than you think.” Then he introduced us to Andreessen Horowitz. We ended up raising $169 million. We needed it. With SaaS, you have more costs. Then you have less revenues upfront.
Sramana Mitra: The big question I have is that exit barrier question. How did you get around that? How sharp was the problem that people were experiencing that you were able to get them off systems like PTC and SolidWorks?
Jon Hirschtick: We’re still in the midst of it. The switching cost is huge.
Sramana Mitra: When did you launch the product?
Jon Hirschtick: We launched our beta in 2015. We had our first real revenue in 2016. This time around, it was even harder to build the product. Building in the cloud is so much harder than on Windows.
Sramana Mitra: Plus, the industry has matured so much. The incumbents are so much more product-rich.
Jon Hirschtick: The table stakes for entry are so much higher. We had to do a much better job. It was harder to build. People are more expensive. The switching cost is there. We sold to PTC last fall for $470 million. Business has accelerated since we’ve been there.
Sramana Mitra: It takes care of the exit cost problem. PTC would facilitate the exit cost.
Jon Hirschtick: PTC facilitates that. The marketplace has moved. COVID woke people up to the value of cloud and remote work.
Sramana Mitra: What revenue level did you reach before you sold?
Jon Hirschtick: We don’t release our revenue. At the time of our acquisition, we had 5,000 paid customers. Our average subscription is $2,000. The acquisition is being built on capturing that market share over time.
Sramana Mitra: This is an extremely strategic move for PTC to go to a next-generation product. PTC’s product is very old. Is there anything else you want to talk about OnShape?
Jon Hirschtick: We’re moving along as part of PTC. We like being here.
Sramana Mitra: You’re going to take it much further?
Jon Hirschtick: Yes, that’s my plan. Our big conference was on Tuesday. We had 20,000 people registered. It’s a very exciting time for us.
Sramana Mitra: Awesome! Thank you for your time.