Sramana Mitra: Let’s switch topics and talk a bit about your financing strategy. I know that you did something recently. Talk me through the whole financial strategy.
Nick Mehta: That is a big part of our success too. It’s expensive to create a category. You have to do these events and hire people. The scales don’t come right away. Overall, we raised $150 million. In modern days, it’s not a lot of money anymore. In the early days, that was a lot of money. We raised our first round amounting to $6 million from Battery Ventures. They believed in us.
They had a lot of SaaS companies in their portfolio. That allowed them to see the need for customer success first hand. They were the first round. The second round was Bain Capital Ventures. The third round was with Bessemer Venture Partners. The fourth round was with Insight Venture Partners. The fifth round was with LightSpeed. In those rounds, they were investors that had seen the need in their portfolio and believed ahead of our actual numbers.
Our valuation in hindsight of the modern world would be modest, but at the time it was pretty high. Investors believed in the potential and also they saw that we had the right team to execute and that we were the leaders in the space. The first five rounds weren’t hard. I’ve written about the challenging period after those first five rounds where we were no longer a startup.
During this time, the category was still not mature enough and our growth slowed down a bit. We tried to raise money. We couldn’t raise venture capital money. We raised debt. That ended up working great because we didn’t get diluted, but it was very demoralizing at the time.
Sramana Mitra: What year are we talking about?
Nick Mehta: This was from 2017 to 2018.
Sramana Mitra: After five rounds, you were seeing slowing growth.
Nick Mehta: We were still growing, but the growth rate had slowed down. We were burning too much money as well. We were an unattractive investment at that point. The reason that growth had slowed wasn’t because of a competitive issue. We were just ahead of the market. The market hadn’t matured fast enough relative to our ambition.
What we did was, we said, “We are going to raise this debt and slow down on hiring.” We didn’t hire any people from 2017 to 2018 and even most of 2019. Two things happened then. The market started maturing. In 2019, we had a big uptick. 2020 was phenomenal. This year was incredible. The market matured for obvious reasons in hindsight. There are just a lot of SaaS and cloud companies now. All of them have customer success teams. All of them know that Gainsight is the main player. It is all coming to us now.
We still have to keep working hard to make sure that it happens. Because we slowed down on hiring and spending, we got more diligent. Financially, our business became great. In Q1 of this year, we generated a ton of cash that we reinvested in the company. We went from burning a lot of money to generating money. We are going to go back to investing but never at that same level of burn that we had.