Sramana Mitra: Tell me how you went about it. You used the lesson that you learned on bootstrapping using services. Tell me more about how you applied that principle to this business.
James Cramer: The first thing that we did was, we got into a room with a whiteboard. It was just the two of us. Because we are such experts in this topic, we thought that we would give it a week or two and we will have this thing all white boarded out, and we’ll have a good model of what the problem is and the corresponding solution. We can then start building.
Five months later, we were still debating what the problem is and what the solution is. It turned out to be a complex problem. It was much more complex than we thought. As we made phone calls throughout the industry as broadly and as deeply as we can make them, we just kept finding more and more exceptions. With repeated exposure with those exceptions, a pattern emerged over time. That took time. We decided to focus on a specific slither of the market which had no solution.
It was also the area that we also knew best which was pure professional services. It also provided the purest example of services. We were motivated not just by professional services, but also by the fact that the world was shifting toward everything being sold as a service. If you are selling hardware, software, services, and managed services, they would all be sold as a service.
When you look at the coding application that was available in the market, they have all been built a generation before. They were very product-centric. Selling things as a service is a different animal. One of the things that we did right is, we would get in front of anybody we could and get as much feedback as we could. To articulate and to practice talking about it was to get feedback from people on what is important. If I could solve this problem, how much would you pay for it? That was what we wanted to know.
When we had screenshots, we would put them in front of people and get feedback. When we would get screenshots that would animate, we would put them in front of people. When we had simplistic prototypes, we would get as much feedback as we could. Throughout that process, we built a few relationships with companies that ultimately became our earliest customers. When you have a product that is kind of ready for the market, you need to ask people to pay for it.
That teaches you so much. There are so many lessons to be learned from that. Not only does it help fund the company, but you also get to know the answers to these questions; what is the price of the product? What is it worth? Does it solve a problem? Is it a need to have or a nice to have? Where do you fit in their thinking? You never really know the answer to that, so we try to invoice our customers as fast as possible so that it would fund the business but also to distill that information and use it for the next turn.
Sramana Mitra: How many customers were part of your early discovery process in a services mode?
James Cramer: There were probably 15 or 20 companies from one end of the spectrum to the other. Not all of them became paying customers for one reason or another. From that group, we were able to get three or four early customers that adopted the software and deployed it.
Sramana Mitra: What were the profiles of these 15 customers that you went after in the beginning? What was your thinking in choosing them and how did you go about finding them?
James Cramer: We made an early decision to go after large enterprise companies. The reason that we did that was that they had the biggest problems and also they are the most sophisticated buyers. They know that the market is not teeming with solutions. They knew that what we were introducing was unique. If they were committed to solving the problem, they would be the most likely to spend the money with us if we could de-risk it enough for them.
If we can take risks off the table, then they would be the most likely to partner with us. This is opposed to the mid-market where they need a mature product that is ready to go. We decided to work on the medium and large enterprise market. We focused our energy there. That turned out to be a game-changing decision although a difficult one.
Sramana Mitra: The ones who did not convert into paying customers, were you able to figure out why they didn’t?
James Cramer: Absolutely. In some cases, the industry fit wasn’t right. There were a couple of engineering firms there. They had their own unique requirements. Even today, that is not a target market for us. We do not focus on that market. In some cases, there were companies in there that turned out to be too small. That’s what validated our decision to focus on the large market rather than the small market.
In one or two companies, the contacts that we had changed positions. We could never reengage with the people because the momentum was lost. There were one or two examples as well where they could not get comfortable with an early-stage company. We increasingly lessened that list to a small number of companies that were early adopters culturally. They were serious about solving the problem. They were also interested in getting behind and shaping the solution and being part of that journey.
One of the things that entrepreneurs don’t think a lot about is when they think about segmenting their market. The good ones think about segmenting their market and really scrubbing that list, but there is a thing that they never do or often miss. If my customer needs to be a $500 million services company in North America, then that’s not where the conversation ended, I needed one of those customers in the early adopter part of the equation. Finding companies that would make that adoption earlier than later is key. That was what was key. We figured out ways to figure if that was something that they would be up for.