Surviving The Dotcom Crash And Building A Sustainable Business: LivePerson CEO Rob LoCascio (Part 3)

Sramana: How much were your early small business customers paying for your product?

Rob LoCascio: At that time they were paying that much, somewhere between $100 and $200 a month. We had the idea back then that it would be best to receive a monthly fee rather than a one-time software fee. That is something that we take for granted today. In January of 1999 we got funded by some investors.

We went around NYC and knocked on a lot of doors. We raised $3 million in January of 1999 from three venture capital firms. From there, we have never looked back. We went public April 7, 2000. We raised $30 million on that IPO, and we were the last Internet IPO. That week was the end of the Internet IPO craze.

Sramana: What were your numbers when you went public in 2000?

Rob LoCascio: We had $2 million in revenue and $20 million in losses. Nobody goes public on those numbers. We had a $300 million market cap. We actually had to cut the deal in half. We were supposed to raise $60 million, but there just were not enough people buying. The IPO market was drying up as we went public. We went public the same day as Krispy Kreme Doughnuts.

Sramana: The market crashed after your IPO. What happened to your company?

Rob LoCascio: It was a series of interesting events. A competitor showed up out of Israel called HumanClick. They copied our product but were delivering it at 1/10th of the cost structure. I saw these guys and very quickly we could see that sales were starting to decrease. Things were looking bad by the end of 2000. We ended up buying them in August 2000 and put the two companies together. We had 180 employees and we were losing $2 million a month in cash. We had $30 million of cash left, so we only had 15 months left.

It was apparent that we had to change. In January of 2001 we started restructuring the company to become profitable. We fired 75% of the employees and got down to about 40 people. We took all of our customers and put them on the HumanClick platform, which enabled us to run our technology cheaper. That was one of the hardest years of my life, and then 9/11 hit. We watched it from our offices. I remember sitting there thinking that we had just fired all of these people who were worried about their jobs, and now they were literally worried about their lives. We just hunkered down and got through it.

By November 2001 we became profitable. Part of it was that a bank in New York lost some space in the World Trade Center. We had rent of $250,000 a month, and by September 2002 we were losing only $300,000 a month as a company. The next day we got a call from the real estate agent telling us that the bank wanted to take over our space. We were down to $7 million in cash, $4 million of which was held by our landlord. Once the bank took that over in November, we became profitable. It was a very tough time but we survived.

This segment is part 3 in the series : Surviving The Dotcom Crash And Building A Sustainable Business: LivePerson CEO Rob LoCascio
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