Funding Strategies to go the Distance – Case – Endeca: By Steve Papa, founder of Endeca
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Transcript of Funding Strategies to go the Distance – Case – Endeca: By Steve Papa, founder of Endeca
Sept. 2006
Oct 2011
May 1999
Wind in the sails…..HBS graduationEndeca
founded
Phase 1: 5/99-11/00 – Getting to First Customer
“Basic research project” to bring efficiency to markets like eBay– Got lucky bringing the right scientists together
Funding was during the Internet bubble (Spring of 2000) and easy– Assembled great set of highly credible VCs and individuals
First customer was 6 week sales cycle…6 months to deploy
Catching a falling knife….
Series A
Series B
Angel
Phase 2: 2001 – Getting to Second Customer
First year over year decline in IT industry spending EVER– “I spent $8M trying to solve that problem last year and I am out of
money”
Ecommerce declared dead
Who wants to be customer #2 of a venture backed company, customer #1 signed July 2000, cash runs out in Oct?
Willing to solve any problem a customer threw at us– Technology “platform” vision, interest but no comitment
Built a leadership team with deep experience
Events and a decision…..
Speaking to every firm out there
As of Aug 1, cash until mid-Oct
As of Aug 15, finally a term sheet from a bottom feeder
As of Aug 21, insider term sheet to close Sept 7 ….much better
As of Sep 1, outsider term sheet to close Sept 14…..even better
How to decide?
Lessons
Macroeconomics matter more than almost anything else
Fundraising starts long before you are pitching to investors
Get ANY term sheet and never stop looking for options until a round is done
It is a multi-play game…relationships matter for the long term Choose who you go into business with carefully – ethics,
commitment, someone that is there for you when you need them
Luck is not optional
Once you agree on a deal….get it done before the world changes
Phase 3: From first 5 customers to 100 customers
First 5 included the use of our “platform” technology for:– Ecommerce– Enterprise search– Business intelligence
Ecommerce emerges as the painkiller….increases revenue ~ 30%
Despite great results still a recession, still need early adopters
“I already do this”
Phase 4: From 100 to 600 customers…..
$0$10,000$20,000$30,000$40,000$50,000$60,000$70,000
Fiscal Year
Revenue 47 478 2,473 5,787 14,859 34,962 67,000% Growth n/ a 917% 417% 134% 156% 135% 100%
2000 2001 2002 2003 2004 2005 2006 est
Ecommerce + big ($) problems nobody else could solve
November 3rd 2006
Phase 5: Recession, Reinvention and Re-Organization
No customers have budget to solve “big problems”– Detected as early as October 2007 (unlucky)– Raise $25M of funding in Q4 2007 in 5 weeks (lucky)
2008 dislocation worst since the Great Depression
Forces us to recognize our platform focus missed the bigger opportunity as two distinct products
Two Endeca business units emerge in 2010:– Agile Ecommerce = Endeca InFront– Agile Business Intelligence = Endeca Latitude
Governor Patrick, July 2011
Phase 6: Exit – IPO or M&A?
August 2011….– AAA US Treasuries?– Europe?
Time
Running a public company
Hiring bankers
The Platform Lives On!
Main lesson: Ideas, Figuring it out, and Execution
Ideas versus execution: Ideas are not in short supply
“Figuring it out” is the fulcrum
Survivorship bias (crossing the chasm, customers right?)
Experience must be placed in context
Timing, territory, and talent
Cap table is a scarce resource – you need help
Relentless pursuit of credibility / Eliminate risk
General Principles taught, learned, and earned
Pursue markets you are passionate about
Macroeconomics, market cycles and investor sentiment matter
Always a good time to innovate but not always a good time for every innovation
An exit plan is more than a list of companies and IPO
More people you hire will be selfishly focused than not“Coin operated sales” is not disparaging
Focus and running a 3 legged race where others aren’t
Get experienced help
# people that can truly help / # of people claiming they can 0– If its too good to be true….it likely is
Repeaters versus creators
Doers vs. leaders
Intellectually curious vs. focused
Experience versus potential
Credibility versus talent…or both?
Luck plays a bigger role than most will admit
But…Luck favors the prepared
Work hard, do things you love to do, have fun and with some luck….you’ll become an “overnight success”
Enterprise Software 2012
2000-present….consolidation era– Big enterprise sw reps….going away
Hard to sell big ticket to IT without account ownership– Partners hard to come by
low cost, low visibility account entry
SAAS apps– Under the radar account entry– Selling to the business
Big Data
Real but overhyped
Apps play versus infrastructure play– Infrastructure too complex for all but a few organizations– Moore’s law + open source + too much competition makes the
infrastructure play a challenge– Only a few very large like Facebook - Teradata as an example
Fundamentally new opportunities in apps
What can a venture partner bring?
Credibility
Talent
Support while figuring it out
Support while friends are destroying the economy
Coaching
Parties with peers
Human Capital Sources and Implications
Academic Smart intellectually curious overachiever Experienced Skilled Combinations of the above
What makes a company builder?
What makes an entrepreneur?– Don’t make it too easy….lesson learned, won’t be appreciated