For good reason, policymakers want an active dialogue with entrepreneurs who build the fast-growing companies that create jobs and keep America at the forefront of innovation. You have something in your hands today that consistently generates passion among startup executives.
The Startup Visa Act was just introduced by Sens. Mark Udall, D-Colo., and Jeff Flake, R-Ariz. Let’s hope the third time is the charm for this legislation, first introduced in 2010. I’m encouraged — especially after seeing that the President’s recent proposal for immigration reform includes visas for foreign entrepreneurs starting businesses here and for foreign graduate students in science and math who want to work here post-graduation.
Read more of Kate’s thoughts on immigration and the Startup Act 3.0 at The Accelerators, a WSJ blog of startup mentors discussing strategies and challenges of creating a new business.
January is a great time to take stock of where we have been and where we are going. 2012 was a great year for ScaleVP, particularly for the things that are most important to us…our portfolio and our people.
First our portfolio: Our decade of focus on SaaS digital marketing was rewarded by liquidity in two investments. In March, the cross-channel interactive marketing leader, ExactTarget, went public providing the company with the growth capital for continued product innovation, strategic acquisitions and global expansion. We invested in ExactTarget in 2009, after working with the team to take additional private money to grow more aggressively – a strategy that worked. Scott Dorsey and his “Team Orange” are a committed group of individuals who have been a pleasure to work with.
In June, social media marketing company, Vitrue, was acquired by Oracle to strengthen the company’s presence in the cloud. Vitrue helps some of the world’s largest brands engage with their customers via social media, a new but critical piece in the marketing ecosystem. Our investment in Vitrue was led by Stacey Bishop who, following a joint research project with University Venture Fund, has expanded her focus to include productivity applications.
Partner Andy Vitus has led years of diligence and research on cloud computing and big data which, in 2012, resulted in two new investments. Boundary sits at the intersection of big data and the shift of IT to the cloud, while DataSift is at the intersection of big data and social. We are working closely with both companies’ teams to scale their businesses.
We are dedicated to the ideal that we do well when we help entrepreneurs grow promising businesses into dominant industry leaders. In 2012, we were involved on the national level helping entrepreneurs. I take personal pride in our work surrounding the JOBS Act, creating a piece of legislation that makes it more feasible for entrepreneurs to build a company, take it public and ultimately, create more jobs. Likewise, we are all so proud of my partner, Rory O’Driscoll, for his industry recognition on the 2012 Forbes Midas list and AlwaysOn VC 100 – achievements that only come from helping founders build great, growing companies. Last, we have been hosting a series of “Scaling Dinners”, bringing CEO’s together to discuss best practices facing running and growing a successful business and sharing our learning’s on our blog, as we did on the topic of the Freemium pricing model, so widely discussed these days.
Also this year, we were fortunate to have some talented people join the ScaleVP team who share our enthusiasm and dedication for our business. In a series of executives-in-residence that ScaleVP has brought on to help with market assessments, Eric Tilenius spent time with us in 2012 to look at the implications of the platform shift from web to mobile. Jaime Lovejoy joined as VP of Marketing to lead our marketing strategy and help advise our portfolio companies. In the fall, we were thrilled to welcome our new Associates, Qiyun Cai and Susan Liu. They both hit the ground running and have proven themselves invaluable from the start.
Finally, I am pleased to announce that Alexander Niehenke joined ScaleVP as Principal in December. With a deep network of entrepreneurs, Alex is a great addition to our investment team. He has the analytical savvy about next generation technology companies, complementing the ScaleVP family. He is already making a significant impact. Welcome Alex, it’s a great way to kick off 2013!
In advance of the SuperInvestor U.S. conference in San Francisco, Kate shares her views on the Private Equity and Venture Capital Blog, SuperReturn, regarding the current state of venture capital, publicity, tech potential and the positive impact of venture-backed, high-growth companies. To read more visit SuperReturn.
It takes a passionate and driven individual to be an entrepreneur, but what happens after the company is launched? How does an entrepreneur go from an idea to building a long-term successful company? As part of our Scaling Q&A Series, we dive into growth strategies and successes from our rising stars.
Describe Axcient in one sentence?
JM: Axcient puts an end to down time and data loss by enabling businesses to store, protect and access all information and systems in the cloud.
What inspired you to start the company?
JM: I actually experienced data loss at my last company. It was very painful and I realized many businesses struggle with this problem. A company has two things: its people and its systems. If you take one of those away and you don’t have a company. I decided I wanted to start a company that solved the problem I experienced.
What is the biggest lesson you’ve learned through the process of starting a company?
JM: Always think bigger. Take Axcient for example, when we started we were thinking about helping companies that were 100 employees and 500 GB, now we are helping companies with thousands of employees and 50 TB of data.
You have to challenge yourself to always think bigger than your initial expectations – it will impact decisions you make regarding positioning, operations, product architecture, etc. My recommendation is to set your expectations and then scale it by 10X and apply it across all of your planning.
What advice would you give other entrepreneurs looking to start a company?
JM: Ask yourself why you want to start a company in the first place. I actually try to deter people from starting a company if they can’t truly answer that question. A lot of folks come out of business school and can be intrigued by the “glitz and glamour” of the valley. This mentality often causes first-time entrepreneurs to fail. Successful entrepreneurs are driven by a burning desire, obsession even, to solve a problem. If you don’t have that, don’t start a company. Building a company can be rewarding if you have that drive and obsession, but it isn’t glamorous and it is anything but easy.
Axcient has experienced a tremendous amount of growth? What’s your secret?
JM: Overall, it comes down to a lot of hard work, passion and focus, but three things do stand out. First, we have been diligent on hiring exceptional people and never compromising on talent. Second, we are very metrics driven. Whether it’s sales, operations or marketing, we make our decisions based on metrics. It forces us to be really ruthless with our priorities and keeps us on path to drive aggressively towards our goals, continuously monitoring as we go. Last, it has been the restraint to not chase every opportunity. We determine what we want to pursue and doggedly pursue it.
Who inspires you?
JM: I have always been a big fan of Richard Branson. I admire the culture he has built around him; one that is open, fair and fosters innovation. Too often, people associate the ability to build a large company with being a megalomaniac and I don’t think that is true. Branson is a good example of a true creative entrepreneur who has built innovative, market dominating companies while promoting a positive culture and a great place to work. I aspire to that with Axcient.
What was the best/most useful business book?
JM: Drive by Daniel Pink is a great book about understanding what motivates people. Understanding your employees and what motivates them makes you a better manager and better for your overall business.
What do you do for fun?
JM: I love to fly fish. You can be out for days and not catch anything, but it challenges me to enjoy the journey and learn from it.
Has it impacted how you run your company?
JM: Yes, I think the basic principles impact my approach to running a business. Fly-fishing is a test in patience, determination and focus. But more importantly, it gives me time to reflect. As I mentioned earlier, a committed entrepreneur is often obsessed with their company or project (and I am guilty) but it is just as important to step back once and awhile. We make critical business decisions every day and if you are too deep in the weeds all of the time it is hard to have the clarity and perspective to make the right decisions.
I have found it invaluable to have activities outside of work, where I don’t think about work and that separation gives me perspective.
Justin Moore is CEO and Founder of Axcient. Follow him at @justinrmoore
Is it possible to work on multiple products or startups at once? The quick answer is yes and no – it depends on where the product is in its evolution.
Read more of Kate’s thoughts on juggling multiple startup goals at The Accelerators, a WSJ blog of startup mentors discussing strategies and challenges of creating a new business.
Recruiting is probably the most critical task an entrepreneur undertakes. It will distinguish mere idea generators from entrepreneurs who are able to build companies. Your ability to bring others along with you is the litmus test of both your idea and your ability to inspire others to join a venture that is, by definition, high-risk and unproven. The best leaders are magnets for talent and always on the lookout for the best hires.
Read more of Kate’s thoughts on recruiting talent at The Accelerators, a WSJ blog of startup mentors discussing strategies and challenges of creating a new business.
Recently, we hosted our quarterly Scaling Dinner Series in San Francisco. The topic? Reconciling Freemium and Sales.
Given the overwhelming response to the dinner event, freemium is clearly a hot topic. However, many companies are still struggling with how to effectively capitalize on the model. The idea that having vast numbers of free users will magically result in an enterprise software business emerging whole, like Venus from the sea, has pretty much faded. But, what is also clear is that the right freemium offering can pave the way for enterprise adoption.
Two of our portfolio companies, Box and DocuSign, kicked off the dinner with their own perspectives on driving success with freemium. Executives from 25 companies engaged in a lively discussion on the trade-offs to make the model work, the topic of free trial vs. truly freemium, and, of course, how much do you give for free? Too much for free and the company becomes non-viable. Too little for free and the adoption just doesn’t happen.
We gleaned the following 8 tips on how to make freemium work.
Thanks to those who participated in the event and stay tuned for the next one!
The good news is that there are more tools than ever to market-test your idea. The bad news is that there are many of them and some may cost more than you can afford for your startup.
Read more of Kate’s thoughts on avoiding a marketplace flop at The Accelerators, a WSJ blog of startup mentors discussing strategies and challenges of creating a new business.
The Child is Father of the Man
- The Rainbow, Wordsworth
As fall ends and winter approaches, management teams turn to the task of planning for the year ahead. In discussions with our portfolio CEO’s, a question that is frequently asked is: “How fast can, or should, we grow?”
To answer the question, we looked at a wide variety of SaaS companies, both private and public, and found that the growth rate in any given year is highly predictive of the growth rate in the next.
Looking at the scatter plot below, three points become clear:
The solid line on the chart represents the best fit to our data set. The slope of the best-fit line relates the current year’s growth rate to next year’s likely growth. As a rule of thumb, therefore, next year’s growth rate is likely to be 85% of what this year’s was. As is apparent from the relatively tight cluster of points around the line, growth rates decay within a fairly predictable range as companies mature.
There are two corner cases worth exploring: large companies growing quickly and small companies growing slowly. Let’s look at Salesforce.com as an example of the former. In the three years during which Salesforce grew from $100M to $500M (2005-2007) its annual growth rates were 84%, 76%, and 60%. A year later, it was still growing at 50% CAGR. Even as Salesforce approached $1B in revenue, it was able to maintain its growth rate from year to year.
The second corner case is that of small companies growing slowly. All venture portfolios have a few companies in this category. While there is some satisfaction to be had from the annual increase in revenue, management teams are tempted to hope for (and often forecast) a sudden increase in growth rate. Our experience, though, is that low growth rates are frequently systemic to markets and are more suggestive of a constrained market size (or some other unfavorable dynamic) than a dysfunctional sales organization. In these cases, capital efficient growth is crucial to a good outcome.
In our next post on SaaS valuations we will look at how current growth rate and the expected ‘growth decay trajectory’ relate to future outcomes and, consequently, valuation multiples today. More importantly, we will discuss what small, fast growing companies can do to maintain high growth rates.
Am I prepared to fail? Most of you considering this have excelled in everything you have tried before. That is great training since that is what gives you the confidence, discipline and drive to attempt a start-up…but you need to be comfortable with the idea that this may be the first time you fail…at least initially. All start-ups involve copious amounts of risk – or the rewards wouldn’t be there. Even the most successful start-ups from Apple to Cisco to Google had their challenging days early on. You need to be ready to swim in this high risk pool knowing that at the very least, you will be better prepared for the next startup if this idea fails.
Read more of Kate’s thoughts on what it takes to attempt a startup at The Accelerators, a WSJ blog of startup mentors discussing strategies and challenges of creating a new business.