How To Get a 20 Million Dollar Pre-Money Valuation for Series A: Tableau Software CEO Christian Chabot (Part 7)

SM: I often tell entrepreneurs to bootstrap the early stage, and if they do raise money it should result in a better valuation. They have a validated business. Did you find that to be the case during your valuation negotiations?

CC: We are a great example of bootstrapping paying off. In Q3 2004 we raised money. At that time the median valuation for a first-time fund-raising company was something like $5 million pre. We raised at $20 million pre. The only reason we were able to do that is because we had a validated business. VCs would rather pay a higher price for something more secure.

SM: How have your revenue ramps developed since that time?

CC: In 2004 we did $800,000. That rose to $2.1 million in 2005, $3.7 million in 2006, $7.8 million in 2007 and $13.9 million in 2008. Our final numbers for 2009 had us at $20.1 million.

SM: What is your assessment of your TAM?

CC: If you went to a traditional analyst firm and asked them how big the business intelligence market is, they will all say $6 billion to $7 billion. Entrepreneurs tend to laugh at these firms because they always look at the past and not the future. They are looking at yesterdays market, which is not the TAM. They are not willing to consider the fact that a new technology changes the market size. I’m not worried about how big the business intelligence market is today; it’s how big the business intelligence market would be today if the technology was easier to use and more affordable. My answer is between $15 billion and $18 billion.

SM: You have positioned your company as a data visualization company. Your target audience is the data worker. To me, the TAM is the total number of data workers multiplied by their worth.

CC: I understand the spirit of your question. So far today I have described the technology well, but I haven’t told you what we’re doing with it. We’ve targeted data workers with our first product. We now have three products. One strategy we could have taken was to be a visualization layer to the big companies. That would have been the safe business bet. However, it would have had a much smaller market size and with higher average user prices. We rejected that strategy. We decided to invade the entire market below us. Tableau sells rapid-fire business intelligence.

SM: That puts you in competition with Lucidera.

CC: I don’t worry about them because they are a startup. My philosophy is that startups should never worry about other startups. I want to compete against Oracle and Microsoft. In seven years I have never seen a customer use Lucidera. We have competed against Excel, Business Objects, Oracle, Microsoft, Information Builders, and companies like that.

SM: You have a smaller, faster, cheaper, business intelligence suite. In this way you have very sophisticated visualization.

CC: That is very well put. Even though we’re not SAS, we are analogous to SalesForce. They were going into a identifiable market market that was very well-known with a very specific buying rule.What they invented was a brand-new way of servicing the market with something faster, lighter, and more affordable. We are almost a carbon copy of that in business intelligence with the exception that we achieved those things by delivering software without being a software-as-a-service model company.

SM: Have you been able to knock Business Objects or Cognos off major enterprise deals?

CC: Every day. More important, for every deal we win we have grown the market in another way. We are winning deals where those old solutions were non-starters in the first place. That is why our TAM is much bigger. We are bringing analytics and visualization to a new part of the market.

SM: Why have you not done SaaS?

CC: Our next move is a SaaS move. We are going to take our core visualization tech knowledge and start giving it away free on the Web. People will be able to populate and use it on the canvas of the World Wide Web. Our new product will be relevant to virtually anyone who posts information online. Originally, the Web was all text. Then images became a first-class citizen. Then video merged. I argue that the fourth type of content that human beings produce is data. Nobody has cracked that on the Web yet. Nobody has made data on the Web as fun and consumable and beautiful as online video.

SM: I know you also run a blog. Tell us some about that.

CC: I run a blog called IPO-Dashboards.com which I do not keep as up to date as I should. Once an entrepreneur gets out of the fragile stage where they need to find revenue and they realize they’re building a company, they need to start to think about scaling. The question of how fast to grow is on the top of every entrepreneur’s mind. Growth rate is the keystone for a lot of planning decisions.

SM: Great story. Thanks for your time.

This segment is part 7 in the series : How To Get a 20 Million Dollar Pre-Money Valuation for Series A: Tableau Software CEO Christian Chabot
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