This week, we announced a $10M growth equity investment in Pramata. I am very honored to be joining the Board and am excited to work with the team going forward. So, what do they do and why did we invest?
What does Pramata do?
It’s very simple. Pramata extracts key information out of enterprise customer contracts and puts the data into CRM systems so that enterprise sales reps, sales ops, and account managers can have a clean and accurate view about an existing customer relationship. What’s so hard about that? Well, it might not be hard if you are an enterprise with 5 sales reps, selling one product, to 30 customers, on a standard contract. But, what if you have hundreds or thousands of reps, all across the country or world, selling dozens or hundreds of products, to thousands or tens of thousands of customers, with several distinct buyers within the same customer, mostly on negotiated non-standard contracts, with SLAs, addendums, etc.? Well, then it gets very complicated, very quickly. But, that is just direct sales.
What if you throw in channel partners who also sell your products with their own contract structures? It’s even more complicated. And, what if your company is acquisitive, so you are regularly layering in companies with overlapping customers on different contract structures? Then the complexity is nearly impossible to manage. The net of it is for a large enterprise that has negotiated enterprise customer contracts – a single customer relationship can be buried in hundreds, if not thousands, of complex and ever-evolving contractual documents.
When that’s the situation, it becomes incredibly challenging to answer seemingly very simple questions that sales reps and account managers want to know such as:
- What products or services has this customer bought?
- How much does this customer spend and on what?
- What are key dates, milestones, expiration periods, etc. on their contract?
- How much are they paying and what discounts are in effect?
- Are there any non-standard terms or overlapping agreements?
It becomes even harder for sales ops to have visibility across their customer base to answer important questions like:
- Which customers are expiring in the next 6 months?
- Which customers bought x product, so we can focus on upselling y product?
- Which customers have non-standard pricing?
Having a clear view into a customer relationship has very practical implications. Account managers know when to approach customers about renewals or products to upsell. New reps can get up to speed quickly on existing customer relationships. Bills can actually be right (which is a bigger problem than meets the eye). Pricing and utilization can be optimized across a customer when you have a holistic view into the relationship. Net net, having a clear view of customers can have direct and profound revenue and productivity implications for enterprise sales teams.
Why Did We Invest In Pramata?
There were lots of really important reasons why we invested in Pramata, and then one indispensable reason.
Among the really important reasons:
- Great Product-Market Fit. We really believe the problem Pramata has identified and the way they solve it can provide tremendous value across a broad cross-section of enterprises. It’s a big pervasive problem that they have cracked the code on solving.
- Blue Chip, Highly Recurring Customers. It’s not often we see a company start at the high-end of the market – winning the biggest and best brands first. Industry leaders like Cisco, Medtronic, Centurylink, FICO, Comcast among many other customers provide great validation for the value of the product.
- Nirvana Customer Feedback. The before Pramata/after Pramata feedback from existing customers was not just good – it was described as a game-changer. A number of customers talked about how Pramata is the single-most important vendor that the sales team works with.
- Proven Delivery Model. They can deliver the goods. They give customers a great customer experience. They live up to their promises. They do what they say they’re going to do. Their delivery model has been refined and hardened taking on some of the largest companies in the world.
- Strong growth. Of course, this is indispensable for us as a growth equity investor – but the company is experiencing strong growth as the market becomes more aware that the solution exists. We certainly expect that our investment will drive even stronger growth ahead.
But, the most important reason we invested was apparent the very first time I met with Praful Saklani, CEO, well over a year ago – philosophical alignment and shared values with the management team. From the very first time I met Praful, and met other members of the Pramata team, it was very clear to me that we think alike and share common points of view on how to build a business. We share an old-fashioned sensibility that businesses should be built off of delivering real value to happy customers, egos should be checked at the door, and we should do right by the people around us. My reaction the first time and every subsequent time I’ve met with the Pramata team is this is a Volition management team. And, I’m thrilled to make that a reality today.
…the market size slide.
My sense is most entrepreneurs feel like they have to have a $1B+ market size for investors to get interested. And, then the more aggressive entrepreneurs, knowing that everyone else has at least a $1B+ market size, come in with the $5B-$10B+ market sizes. The means to arrive at these numbers is usually to take a generous number of possible customers and multiply that times a large spend per customer to equate to the multi-billion dollar “addressable market size“. Others might site 3rd party data sources which is intended to lend credibility to the analysis, but which are largely derived by the same methodology. It’s this approach to market size analysis which I don’t find particularly useful and can generate a false sense of comfort if you actually believe it.
When I’m looking at a prospective investment in a company, here’s how I think about market size:
The first question I ask is how much revenue do the companies that sell principally the same product or service generate today. This is the “current market size“. For example, when we invested in Ensighten in 2012, which started out as a tag management vendor, if you added up all of the revenue (from tag management software) of all of the tag management vendors, the total would have been less than $30M, but with hyper growth. That, in my mind, was the current market size for tag management. It was a small number because tag management was a new market rather than an existing market. Alternatively when we invested in Globaltranz in 2011, which is an Internet freight brokerage, the revenue of all of the companies that broker freight capacity in the US was $127B. It was a much larger current market, but with more moderate growth given the maturity of the industry.
It’s important to establish the current market size because it helps to establish whether the company is going after a new or an existing market. If the current market size is small, such as tag management was two years ago, that’s not a deal killer by definition. It just means you have to develop strong conviction that the market will grow and appreciate the inherent risk with that. Lots of investments fail because a new market doesn’t grow at the scale or pace anticipated. If the current market size is large, but not experiencing hyper growth, such as in the overall freight brokerage industry, that’s also not a deal killer by definition. It just means you have to have a crystal clear rationale on why market spend will shift towards a new upstart rather than stay with the incumbent. These are important and fundamentally different questions.
The next question I then ask on market size when evaluating a company is how much revenue, in aggregate, will all of the companies that sell principally the same product or service generate in the future (5-10 years from now). I think of this as the “attainable market size“. When you define a market size by the aggregate revenue of the competitors, it immediately juxtaposes market size against market leadership. For example, if an entrepreneur wants to say their company will have a large multi-billion dollar attainable market (e.g. $5B in 5 years), but their company “only” projects $50M in revenue in 5 years, then it begs the question why 99% of the spend in the market did not go their way. You can claim a large attainable market, but it becomes harder to claim market leadership with little market share. Alternatively, if an entrepreneur wants to call their company a market leader by generating $50M of revenue of a $200M attainable market, then it begs the question of whether the product or service has that much value if the eventual attainable market isn’t that large. It forces everyone to think through the realities of how their market will evolve and how their company’s competitive position will evolve alongside that.
Today, Ensighten is one of the fastest growing SaaS companies in the country and Globaltranz is one of the fastest growing freight brokerages in the country. Despite coming from diametrically different current market sizes when we invested, in both cases, the attainable market has turned out to be large and both have established strong leadership positions within those markets. We’ve been fortunate that the stars have aligned for both.
In summary, my biggest issue with the bloated addressable market slides we see day in and day out in company pitches, is we all know that when we fast forward 5-10 years, almost in all cases, the actual aggregate revenue generated by the companies in those markets will not come close to equaling the addressable market size. In other words, the attainable market almost always turns out to be a small fraction of the addressable market. This tells me that the addressable market size slide is too theoretical to actually be useful and should have little or no bearing on an investment decision. For this reason, in my opinion, it is generally the least useful slide in the pitch deck.
After hearing dozens of company pitches over the last week or so, I noticed a common theme with how CEOs told the story of their business. They typically expended great energy explaining what their company’s product or service does. They will talk about features and functionality that no other player in the market has. Where appropriate, they will dive into a demo to show exactly how their product is such a game changer. While this is important, in some respects, I think it is putting the cart before the horse.
Personally speaking, I think a good story for a business starts with the problem that is being solved. It’s hard to fall in love with a product, if you don’t believe it solves a big problem. A problem worth solving is one that is a high priority issue for the one experiencing it. It is a problem that is experienced to a similarly high degree, by a large and common constituency. It is also a problem that people are willing to pay, and sometimes pay substantially, to resolve.
In every company pitch, the CEO will try to tell me what the company does. But, you may be surprised that in many pitches, the CEO may neglect to really spend time articulating the problem their company solves. Sometimes when I ask very directly what problem it is that they solve, the response will be a description of product functionality, not in fact a problem. This to me is a telltale sign that the company was started to create functionality, not necessarily to solve an important problem.
If we were ever to get into due diligence on a company, we will likely spend as much time validating the magnitude and priority of the problem the company solves as we do on the merits of the product. If we love your product, but are unconvinced on the problem it solves – we are unlikely to get across the finish line on an investment. The reality is a company can control how a product evolves and develops. But, the problem is what it is – so choosing the right problem to solve is critical for the ultimate success of any business.
So my simple advice is that when you tell the story of your business, start with the problem. If you convince people of the problem your company is trying to solve, you have laid the foundation for them to love what your company does.
Following up on my prior post, “What Is Tag Management”, this second post will be specifically about why Volition Capital invested in enterprise tag management leader, Ensighten. Often when we announce a new investment, like we did with Ensighten last week, people ask me why we invested. Hopefully this post will serve to help answer that question. Let me emphasize that for any investment, the management team and the people behind the company is the most important factor. That being said, I will start with some other key factors on why we invested and end with the most important one, the team.
#1: Clear Competitive Separation and Market Leadership
When a new market emerges that we think will be a high growth and strategic market, like tag management, we want to invest in the market leader. While the term “market leader” is easily thrown around in marketing collateral, we use it sparingly when it comes to our investment decisions. Our analysis on whether Ensighten is the market leader in tag management rests on a number of objective measures.
The first sets of measures are financially oriented. Is Ensighten the largest and fastest growing tag management vendor? Yes and yes. We are very confident that Ensighten is the largest independent tag management vendor in the market based on revenue. The revenue difference between Ensighten and the next largest player in the market is quite substantial. We also believe that Ensighten is the fastest growing company in the market in terms of revenue growth. These size and growth characteristics combined suggests that Ensighten is scaling aggressively and expanding its lead over the competition.
A second key measure of leadership is competitive win-rate. When Ensighten goes up against its competitors in a sale process, they win 90%+ of the time. This is an astonishingly high win-rate. After talking to dozens of blue-chip, brand name customers who tested Ensighten against its competitors in proof-of-concepts (POC), we think Ensighten is winning because of superior technology. I will expand on the technology later, but a 90%+ win rate is a clear indicator of competitive separation.
A third important measure of market leadership is customer retention. Ensighten has a near 100% customer retention rate. This means that once Ensighten wins a customer, they almost always keep the customer. This level of retention indicates that the value the customer receives is extremely high. When you combine these attributes: largest company, fastest growing, 90%+ win rate, and near 100% customer retention – we think Ensighten has both established and is extending its leadership position in the tag management market. That’s a great dynamic to invest behind.
#2: High Customer Value – Must-Have Product
We talked to dozens of Ensighten’s blue-chip enterprise customers including Microsoft, Sony, Seagate, Symantec, United, Dell, and many others. Typically, Ensighten’s buyer comes from the marketing organization of these companies. The customers communicated to us, both with their words and their tone, that in no uncertain terms, the value they are receiving from Ensighten is exceptionally high. We think of value as the differential between how much pain the customer experiences from a problem and the delight of the customer when that problem is remediated. On both measures, Ensighten’s customers measured exceptionally high.
In their own words, the key problem marketing organizations have before deploying Ensighten is a fundamental inability to do their job. As I discussed in greater detail in my prior post, “What is Tag Management”, if adding, changing, fixing, or deleting a tag requires dependencies on IT release cycles that can run in intervals of many months – marketing is completely hamstrung. They can’t modify website analytics with ease. They can’t test different ad networks or tailor their website with ease. They can’t deploy and customize important customer centric apps like chat, voice of the customer, and recommendation engines without substantial dependencies on IT. They just can’t do their job. When marketers describe this pain point – it’s very clear in their tone that the problem is debilitating.
On the flipside, when customers describe what life is like after deploying Ensighten’s tag management system (TMS), the joy in their tone is obvious. It was clear to me that the dozens of customers we spoke with were smiling ear-to-ear on the other end of the phone when they talked about Ensighten’s value. That’s rare in customer references. Often times customers will say nice things to be polite to their vendors, but their tone will be more muted. In Ensighten’s case, the customers were raving fans. The reason is that Ensighten’s TMS gave these marketers unprecedented agility and control not to just do their job, but importantly, to do their job well.
#3: World-Class Technology
We spent an extraordinary amount of time evaluating Ensighten’s technology because the tag management space is noisy. Our conclusion is that tag management is one market where the distinction between complexity in servicing basic tag management needs and enterprise-scale tag management needs is dramatic. This market will evolve to be the tale of two worlds. We believe that low-end tag management is a relatively easy technical proposition and will be commoditized quickly. Conversely, we also believe that supporting the complexity and scale of large enterprise tag management deployments is one of the hardest engineering problems we have seen.
From inception, Ensighten has had four philosophical pillars underpinning all technology development. 1. All Ensighten products must be able to be delivered through a single line of code. 2. The platform must support all tag-based applications. 3. The platform must support any device (e.g. PC, smartphone, tablet, kiosk, ATM, etc.). 4. Everything must enhance page performance. First of all, this is an outlandish vision in many respects. Many would have said at the outset that it couldn’t be done. To those who would try, there would have been hundreds, if not thousands, of engineering decisions along the way where it would have been simpler to relax these constraints to get to market more easily and quickly. But, Ensighten pulled together a team with both the technical genius and discipline to architect the solution that stayed true to these principles.
Adherence to these principles is why Ensighten now stands in the position of having the only tag management solution that can truly meet the needs of any and every enterprise-scale customer. This is why Ensighten wins over 90%+ of the time against its competitors. Ensighten’s entire platform was designed from the ground up with rigid adherence to principles that would ultimately prove to be critical to servicing enterprise-scale deployments. After the conclusion of an exhaustive technical diligence process, we sat back and just said, “Wow.” It became clear that Ensighten has a brilliant technical team that cares deeply about their engineering – and the biggest beneficiary of that is their customers.
#4: Large Strategic Market Whose Time Is Now
A year ago, not many people knew much about tag management. We believe that a year from now, tag management will be known as one of the most strategic and important enabling technologies in digital marketing. While Ensighten aims to be the enterprise leader in this market, we believe that thousands of companies large and small will be deploying some form of tag management in the years to come. Large enterprises in particular will have to deploy an enterprise scale tag management system (TMS) like Ensighten just to be competitive. Not having a TMS will soon be an unacceptable position for any enterprise whose web and digital properties are mission critical.
Tag management will become a critical part of web infrastructure as it sits between a company’s digital properties and potentially every third party application that interacts with those properties. This position will be very strategic as the TMS will have potentially unparalleled visibility into the activity and data of a company’s digital properties. Therefore, we expect the tag management market to evolve as quickly and as pervasively as the web analytics market. We anticipate consolidation early in the lifecycle of the market, but also believe there is room for one or two significant independent companies – a position we expect Ensighten to occupy.
#5: Talented and Trustworthy Management Team
Let me finish this post with where my interest in Ensighten all started, the management team. Specifically, I connected with Josh Manion, founder and CEO, the first time in August 2011. He was kind enough to return the cold call of an associate who was in his first month on the job (related post: What Happens After The Associate Cold Call). I met with Josh five times before we seriously engaged in discussions on an investment. Josh is unique – home schooled through high school, chess champion, MIT grad, and grew up in a small town in Wisconsin. The first thing I came to appreciate about Josh is an alignment of values. He’s a nice guy. He’s trustworthy. He’s a grounded and decent person. He’s got old-school values which I respect. The second thing I came to appreciate about Josh is he’s just inordinately smart. The third thing I liked about Josh is he’s deeply competitive and wants to win. Don’t be fooled by him being a nice guy – he wants to dominate.
As I got to know the rest of the management team, I could see Josh’s characteristics throughout the team – off-the-charts intelligence, good people, and fiercely competitive. They also happen to be real domain experts in the field of tag management and passionate about the problem they are solving. At the end of the day, it was our confidence in the team that was the deciding factor on our investment.
So, there you have it – that’s why Volition Capital invested in Ensighten. Needless to say, we’re excited to be involved and honored to be part of the team.
This week we announced Volition’s newest investment in enterprise tag management leader, Ensighten. I couldn’t be more excited to be involved with the company and to join their Board of Directors. I was sitting down to write a post about why we invested in Ensighten, but after some thought, I realized it would probably be best to first write this post to explain what tag management is for those who don’t live it every day. My next post, therefore, will be about why we invested in Ensighten.
So, what is tag management? Let’s set the stage for the problem.
For many companies, their website is a mission critical part of their business. Hence, to get the most functionality and intelligence from their websites – the webpages themselves interface with many different best-of-breed third party applications. You may not realize it, but when you visit a reasonably sophisticated webpage today, it’s probable that many different third-party applications are loading on that page because of your visit. Some of these applications are visible to you as the end user. Examples of these are ad networks, recommendation engines, video platforms, chat applications, social network plug-ins, re-targeting platforms and feedback engines. Some of these applications are not as visible to you as an end user. Examples of these are web analytics applications, a/b testing platforms, content optimization engines, audience measurement applications, affiliate networks and marketing automation systems.
The way these applications interface with a company’s webpage is typically through a tag. Think of a tag as a little program that is inserted into the html code of that webpage. When the webpage loads, the tag fires, and the application runs. That tag contains the instructions for how that third-party application will operate on that particular webpage for that particular user. For a web analytics platform, it could define what specific parts of the webpage to measure. For an ad network, it could contain instructions on what type of ad unit to run. For a feedback engine, it could set the parameters for what type of feedback module to render. For an a/b testing platform, it could set the algorithms for how different tests will run. Simple enough.
Here’s where it starts to get complicated.
First of all, the tag for a single application can take many different forms. For example, if you want a different ad unit on one webpage versus another, it could necessitate a different tag even if the ad is delivered from the same ad network. If you want the web analytics platform to pull different data from different webpages, which is often the case, that could require different tags. In short, tailoring any application creates many different variants of tags from any single vendor. So, the first complication is there are many different tags, within a single application vendor.
The second complication is that sophisticated websites have lots of different tag-based applications running. In our conversations with Ensighten’s enterprise customers, they may have 10-50 different tag-based applications on any single webpage. The volume of tags is driven by two things. First, companies want best of breed functionality on their websites across all application categories. Secondly, they may be testing different application vendors within each application category. So, that adds even more complexity to the equation.
The third complication is volume. A single website can have hundreds of thousands, if not millions, of webpages. If a tag for a single application needs to be placed on every page, that can be hundreds of thousands of tags on hundreds of thousands of webpages for a single application. Not only can companies have websites with lots of webpages, they may in fact have lots of different websites. Many large enterprises have different web properties with distinct domains often in many different geographies. Some enterprises have hundreds, if not thousands, of distinct web properties. That obviously multiplies the volume problem. Then throw on top of all those websites and all of those webpages – tons of web traffic.
Therein lies the complexity: (lots of tags) x (lots of tag-based applications) x (lots of websites) x (lots of webpages) x (lots of traffic) = millions of tags firing every day to users like you and me from a single company’s web properties. And, I won’t even start talking about other platforms like mobile and flash at this point.
That sets the context, now what’s the problem?
The problem occurs when you want to change, delete, add, fix or reconfigure a tag. Think of a typical marketing analytics or optimization organization at a large enterprise. They’re sitting on top of this sea of potentially millions of tags firing every day as users interact with their web properties. Let’s say they need to change a single tag. Maybe they want to run a different ad unit or capture slightly different analytics data. Because that tag sits in the html code of the webpage, marketing must convince IT that the single change should be in the cue of the next release cycle for the website. If they are successful in that, which is an if, then they must wait until the next IT release cycle for the website which could potentially be many months away. Think about that, it could take months to make a single and simple change to one solitary tag.
In reality, large enterprises need to change tags all of the time. Tags can be programmed improperly, so they need to be fixed. The website itself could change which could necessitate a change to a tag. Maybe they were testing an application on part of the website, and now want to roll it out to other parts of the site. Maybe they want to take down an application or deploy a new one. There are reasons why enterprises need to engage with their tags and their tag-based applications in a dynamic way. But the current model of being beholden to the IT release cycle brings marketing agility to a halt.
That’s where Ensighten comes in.
Ensighten turns the entire methodology for managing tags upside down through its Tag Management System (TMS). They start by placing a single line of code in the header of the website:
That’s it, one single line of code. That code interfaces with Ensighten’s cloud-based TMS every time a user views a webpage. The magic of Ensighten’s TMS is it enables marketing organizations to manage all of their tags without ever touching the code of the website. That means they can now fix, change, add, delete, and reconfigure any and all tags in Ensighten’s TMS right there in the cloud without ever engaging with IT – and those changes will render on the webpage as if the tag was hard-coded onto the page itself. It bears repeating, Ensighten enables this flexibility for any tag-based application. Enterprises now have ultimate flexibility to try different applications, configure existing ones differently, and remove underperforming applications with complete ease. What could take months, if not years to do, can now be done in a days with Ensighten’s TMS. We talked with many of Ensighten’s blue-chip clients like Microsoft, Sony, Symantec, United, Dell, Seagate and several others – and the feedback was very consistent with this sentiment:
“For me to get a new tag added to the site or change an existing one, it would take 4-5 months. In order to get that tag changed, I would have to go through IT, log a defect, get in a release cycle, fight and claw. I was at the mercy of our bureaucratic IT processes. This is one of the best things we’ve ever done. I can go in and change tags within a day. If I need to add something new, I can add it within a day. It has made my life much easier. I am in control of my own destiny.” – Fortune 500 Ensighten customer.
Hopefully that gives you a window into what tag management is and what Ensighten does. I could go into how Ensighten does it, but that would be a longer post. But, let me just say that what sounds simple required some really brilliant technical minds to come together to create. We think the problem of tag management will be a pervasive problem. We think the tag management market will quickly accelerate to be one of the most prominent sectors of the web because the problem is unavoidable. And, we know that Ensighten has a significant lead in the market. But, I shouldn’t get ahead of myself. Now that you know what tag management is, my next post will be about why we invested in Ensighten.
Every venture-backed CEO wants “A” players at every executive position.
“A” players are executives that are 10x more productive than their peers. They are equally excellent strategically and operationally. They are equally capable at rolling up their sleeves or leading others. They thrive – with or without direction. They are big picture and detailed. They are the perfect mix of confidence and humility. They fit into any team culture, thrive under any leadership style, and raise the game of everyone around them, while befriending them all at the same time. Best of all, they miraculously fit within your pay scale, and you can retain them despite brutal competition for their services. “A” players are perfect – except for one small issue – as defined here, they don’t really exist.
In reality, all human beings have strengths and weaknesses. There are certain support structures and cultures within which we will thrive, and others in which we will not. It’s the rare person who is a persistent “A” player across any and all circumstances. A more realistic assessment is that many of us are “B” players who could perform like the “A” player in certain environments and perhaps even function like “C” players in other environments. We are profoundly influenced by co-workers, firm cultures, leadership styles and roles – rather than completely set apart from them. We are not robotic in the execution of our talents.
Therein lies one of the most important roles of the CEO. Many CEOs come with the emphasis that they’re trying to hire “A” players at every role. It’s an admirable goal, but may have a misplaced emphasis. The supposed “A” player arrives and 6 months later they are functioning like a “C+” player. The natural conclusion is that it was a hiring mistake – stoke up the recruiting engine and go out looking for that “A” player again. This might still be the right answer, but it may miss an important point.
The point is that a CEO’s job is to build a championship team, and that may be distinctly different than building a team of champions. A CEO’s job, when it comes to human capital, is to create the environment which will get the best out of people. Some of that is around hiring the right people. But, there are important elements to the equation that are completely distinct from hiring. There are important ingredients like firm culture, organizational structure, leadership style, delineation of roles, team dynamics, development, and others – which can be the difference between the same person functioning like an “A” player or a “C” player.
While I am loathe to use overused sports analogies – this dynamic shows itself very clearly in sports. It is not uncommon at all for a player of average historical performance to change teams – with a different system, different set of teammates, different culture, etc. – and to perform like an All-Star (e.g. Patriots’ WR Wes Welker). And, it is not uncommon at all for an All-Star to change teams – and perform like a mediocre player for the exact same reasons (e.g. Red Sox OF Carl Crawford). This dynamic plays itself out just as frequently in the corporate world.
Therefore, it is important for leaders of companies to not only hire excellent people, but to create a culture and system where the people they hire can and are likely to excel. For whether an executive becomes an “A” player may have as much dependency on the talents of that executive as it does the leader they’re working for and the environment they’re working within.
Given Volition’s focus on bootstrapped high growth technology companies, we meet company founders every week that have built amazing companies with very little resources. It never gets old hearing stories of how founders put companies on their backs and will them to survive and succeed.
Yet, in the process of meeting with founders week-in and week-out, I have begun to notice that with some regularity, certain founders refer to their company as “I”. Often, I will hear phrases like, “I will reach $20M of revenue,” or “I will grow 100% next year and hit breakeven,” or “I will have the best technology platform in the market.” On the face of it, it might seem objectionable to refer to the collective efforts of many people in a company with a first person, singular pronoun. Yet, candidly, I don’t entirely begrudge the practice, but it also reflects a company that is still in the process of maturing.
I don’t begrudge it because there was a point in time when the company was quite literally just the founder. If anything was going to get done, the founder was going to do it. Even in the early days of a company where there are other employees, it’s not uncommon to have the founder be the senior person for every functional aspect of the business. The founder is both the head of sales and by default the top salesperson. The founder is the product visionary, product developer, and only QA person. The founder is effectively the chief financial officer and the chief financier of the company. And, of course the founder is the energy and spirit of the company. I don’t begrudge use of the term “I” to refer to the company because for many of these companies, without the founder, there would be no company.
But, it also refers to a company that has some maturing to do. Even if a founder is seemingly indispensable to a company – like Steve Jobs, Jeff Bezos, or Sergey Brin – a company must grow to the point where the center of the company isn’t the founder, but the center of the company is in fact the company itself, and its mission for its customers. Ironically, the person best positioned to help drive this transition in a company is the founder.
Some founders adopt a mentality to keep things comfortable for themselves – the strategy, people, and practices of the company stay within the comfort zone of the founder. The founder structurally builds a company where they are at the center and in many ways the company exists not only because of the founder, but to serve the founder as well. Other founders aim to build something bigger than themselves. The company is not defined by their own comfort zone, but by the vision of what the company can achieve. The company exists not for any single individual, but for its greater mission and purpose. The company transitions from an “I” to a “we”. This can be an uncomfortable process for some founders, but often times it’s a necessary one in order for the company to reach its fullest potential.
I have immeasurable respect for founders. Day-in and day-out, I’m rooting for the founders of companies that we invest in and even the founders of companies that we don’t invest in. There are many people that work at a company, but only one founder or founding team. It’s a special and unchangeable position. But, for companies to truly succeed, they can’t just be about the founder. They need to be about something more. And, that’s perhaps a goal all founders can aspire towards.
This is only one data point but I thought it was interesting. About a month ago, my wife launched a website called Activity Yard. It’s a website community where parents rate and review activities for their kids. The URL was submitted to Google and Bing on the same day in August. Out of sheer curiosity, I started to check the rate at which the two search engines spidered the site. Fast forward about 4 weeks, and the results are interesting – Google spidered 3,000 times more pages than Bing.
You can see in this image – Google has spidered “about 12,000” pages on a site search of Activity Yard.
Now, here’s Bing’s result taken on exactly the same day (today). It only registers “4 results” for the same site search of Activity Yard. It would have almost been better if Bing’s result was at 0. Again, only one data point, but if this data point is directionally correct – Bing’s not even in the same galaxy as Google when it comes to spidering pace.
Volition Capital announced a $10M investment in Globaltranz this week. We couldn’t be more excited about the investment so I thought I’d share a little bit about why. Globaltranz enables small businesses to go online to comparison shop and procure freight capacity – most notably trucking and other modes of transport. It is somewhat analogous to how consumers use Expedia or Orbitz for airline travel, but in Globaltranz’s case, the end customers are businesses that are procuring freight. Next time you’re driving on the road, look around at the trucks on the road – Globaltranz probably had a hand in putting cargo on that truck.
The value proposition is very simple. Globaltranz offers more selection and better rates to small businesses that ship goods. In tougher economic times, the ability to save money on non-core functions like shipping is really valuable to small businesses. On the flip-side, Globaltranz offers freight carriers (e.g. trucking companies) a low cost way to reach the small business customer. It’s too expensive for carriers to sell small businesses direct, yet they certainly value additional volume given the fixed-cost nature of their business. The value is very clear to all parties which is probably why the company is growing so aggressively.
Globaltranz represents exactly the kind of company that Volition loves to invest in. They are high growth: ~100% year-over-year growth for a number of years in a row. They have a sizable and diversified revenue base. They are bootstrapped: having never raised any institutional capital throughout the company’s history. They are led by an experienced and dedicated management team. And they have aspirations for greatness: their stated goal is $1 billion in revenue which given the size of this market is attainable. They have accomplished a lot without any investment, and it is our hope that through our partnership and capital, the company will achieve even greater heights going forward.
Needless to say, we are very pleased to be the first institutional investor in Globaltranz.
We are very pleased to partner with Cue Ball Capital on a $10 million investment in Stylesight which was announced yesterday. Stylesight is the leading style information service and SAAS platform for the global design ecosystem. Thousands of retailers, brands and manufacturers are using the subscription service to be inspired by real-time design images from around the world and leverage that content into a web-based design process.
Want to know what kind of black, above knee, modern black skirts women were wearing on the streets of Sao Paolo – yesterday? Stylesight can tell you. Want to take those high resolution images, zoom in on the stitching, and create a story board for the front end of your Spring lineup design process? Stylesight can do that for you as well. In millions of different derivations, Stylesight brings the world of design to your fingertips in real-time. As their tag line goes: “Images that Inspire. Tools to Get the Job Done.”
What I love about Stylesight is when prospects see the product – there is such a huge “wow” factor. I was at a launch party for their latest release – and the expressions of amazement on prospects faces tells it all. The conversion rate to customer after seeing the demo is pretty staggering. With customers that love the service and a wide open market, Stylesight is becoming the industry standard, which is why they the grew so aggressively through a terrible economy last year. Stylesight’s ambition for global leadership are firmly in place, and we’re pleased to support them.
We are also very pleased to partner with Cue Ball Capital for the first time. It is a privilege to be working with Tony Tjan and Dick Harrington at Cue Ball. I personally view Cue Ball as a rising star in the Boston venture capital scene. They have a wealth of knowledge on recurring revenue, information services businesses – and the Cue Ball Collective is for real. There was substantial interest from different financial parties for this round, but Cue Ball stood above the rest given their expertise, value and enthusiasm.
Stylesight also happens to be the type of company we love at Volition. When we first came across Stylesight – it was and is a high growth, founder-owned, principally bootstrapped company with a strong recurring revenue base and a diversified, very satisfied customer base. Given our investment, it is no longer a bootstrapped company, but we all expect that the capital and partnership will lead to a much larger end outcome for all involved.
Exciting times for Stylesight, Cue Ball and Volition. Onwards and upwards.