If you have been bootstrapping and think you are ready for investors, you need to learn how investors think. First, please study our free Bootstrapping course and Investor Introductions page. Then start looking for entrepreneur – investor fit. Today I introduce you toScott Sandell.
Scott Sandell, General Partner at NEA, is one of NEA’s star investors. He has been named to the Forbes Midas list every year since 2007, and has been involved with eight Unicorn companies including Salesforce.com, Workday, Webex, Tableau, and others. During our conversation in 2015, Scott discusses, specifically, Webex and Tableau in quite a bit of depth. In both companies, the scrappy, capital-efficient management of those businesses were striking!
Among Silicon Valley’s venture firms, NEA holds a special place in my own entrepreneurial journey, being the first VC firm that I successfully raised funding from. Oddly, at that time in the late nineties, the fact that my company was doing product development in India was considered unacceptable. Of course, all that changed in due course, and today India is firmly established on the startup map, as are China, Europe, and many other nations. NEA was an early adopter of the global entrepreneurship trend, and has offices in India and China. They also invest elsewhere in the world, where they don’t have offices. You can listen to the podcast interview here and the entire roundtable program here:
Sramana Mitra: Scott, it’s a pleasure to have you. What thrills me is that NEA is the first VC fund that I ever worked with.
Scott Sandell: It’s great to be on your program. I’m just thrilled to see what you’re doing. You were ahead of your time, I suppose, in the same way I was investing in WebEx and Salesforce before anybody coined the term SaaS. I remember going to a conference where I was invited to speak about SaaS and I didn’t know what it was. Similarly, you figured out that entrepreneurship was going to happen everywhere.
Sramana Mitra: You just gave me a segue into one topic that we should probably start with. It’s this concept of being ahead of time. I have a tendency of being ahead of time. I’ve been ahead of time with every single company that I’ve done. By the time I got to this one, I already realized that I had this tendency to be ahead of time, so I decided not to put this on a venture capital clock. I had offers for VC money and I didn’t take it.
So far, we have run a bootstrapped profitable company for the last four years. I know two of these case studies that you have invested in – Tableau and WebEx. Both entrepreneurs have used this technique of bootstrapping first and raising money later. Can you talk about what you saw when they came to you?
Scott Sandell: They’re both wonderful stories. In the case of WebEx, I went to see Subrah in 1998. They had bootstrapped the company. In fact, it originated as a different company, which they sold to somebody else and then bought some of the IP back. It was a fairly long journey before they got to the concept that we all know today as WebEx.
At that point, they were able to raise some money from Jan Baan who was a fantastic supporter of theirs. That was probably considered the Series A. We came along in what would have been the Series B. At that time, they had launched the service we now know as WebEx about six months earlier. It was growing very nicely. I want to say, in the first quarter, they maybe had $50,000 in revenue.
In the second quarter, they had $100,000. They were on their way to $250,000. I met them in the middle of the third quarter. To me, what was obvious about WebEx is that, first of all, the market was speaking. It was growing very fast. It was one of these services that I always try to look for, which are things that are really easy to use and have tremendous value to a lot of people. That was certainly the case with WebEx. It was also the first company, which introduced me to the concept of virality.
I had never invested in a company before where the very use of the product introduces it to other users. Of course, that’s naturally the case with WebEx. In early days, it was even more pronounced because the service was used by salespeople to make presentations to their prospective customers who were often other salespeople. It just grew like crazy without any marketing whatsoever in the early days. They spent quite a lot of energy and money building the brand that we know today, which is the only brand ever retained after an acquisition by Cisco.