On The Way To 100 Million Dollars In SaaS Revenue: Vocus CEO Rick Rudman (Part 3)

SM: Was it a software-as-a-service offering?

RR: When we launched the product in 1997, we did it on the desktop. There was no SaaS model back then. We sold it as a desktop application from 1997 to 1999. We quickly realized that the PR product suite was going to become the flagship offering of our company. PR and marketing is simply a larger market than government relations.

A lot of companies back then started to Web-enable their applications. There was no SaaS model, but people were using their browsers to get to their desktop applications. We did a Web front end to our application. Every time we sat down to do a product roadmap and prepare for our next release, we went through our requests. The requests were consistently asking us to add more functionality to the Web version of our product.

In late 1999 I sat down with the co-founder and the head of development. We all basically realized that we were not going to maintain a Web product and a desktop product. There were no on-demand companies at that time, so we decided to go all Web. I remember that we came back and made a presentation to our employees. We had 50 at the time. We had to explain to them what SaaS was and that people would rent our applications while we hosted it. It was all completely new.

SM: When in 1999 did you do that?

RR: That was at the tail end of 1999 and the beginning of 2000. At that time we had about $4 million in revenue. That meant we were going to have to put more development effort into porting the application to the Internet. It also meant that our target market was much bigger. We did not have to go on-site to make them buy and expensive application and convince them to buy their own hardware. That made the application much more affordable to smaller companies because they would not have to pay $30,000 to $50,000 for the solution. They could start paying us $5,000 a year.

That is when we recognized that we were going to need to get some venture capital. We could not expand our infrastructure without that venture capital. We raised our first round at the beginning of 2000.

SM: Who did you raise that from?

RR: That was from Edison Venture Fund, and we raised $2 million. That was in January 2000. We were fortunate in terms of the entrepreneur’s journey. A lot of companies at that time were taking much larger Series A rounds. We were not very happy with our valuation, so we took a smaller amount of money.

In hindsight, it was a great decision. Like a lot of companies in the bubble days, we experimented a lot with that money. We blew the whole $2 million on sales and marketing. We made a lot of mistakes. I am very glad that we did not raise more money on our first round.

This segment is part 3 in the series : On The Way To 100 Million Dollars In SaaS Revenue: Vocus CEO Rick Rudman
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