Surviving The Dotcom Crash And Building A Sustainable Business: LivePerson CEO Rob LoCascio (Part 4)

Sramana: What was the revenue level of LivePerson when you became profitable in 2001?

Rob LoCascio: We were around $4 million in annual sales.

Sramana: Once you achieved profitability, did you go out and raise additional funds?

Rob LoCascio: No. We got down to $7 million in cash but the stock was trading at a low of 7 cents. We had a market cap of $2 million dollars. Most people thought we would go bankrupt. At lot of Internet companies went out of business during that time. I thought about the time I had to shut down my first company and sleep on the couch for two years. For me, I was too emotionally tied to fail again. I wanted to keep it alive under any circumstance.

Sramana: You had a monthly subscription model during a time when that was not a popular business model. How did you pick up customers? What is the story there?

Rob LoCascio: We picked up QVC, EarthLink, Intuit, Ford, and a bunch of other companies that were not dot-com companies. We were fortunate to have a basis of revenue that was not entirely DotCom businesses, although half of our customers were dot-coms. We essentially watch half our customer base go out of business. We went back to the existing base of customers, including our three largest, which were QVC, Intuit, and EarthLink, and I told them that we needed their help.

We had to triple and quadruple their fees. In return we gave them unlimited licenses for the next three years. We showed them our plan to cut costs and become profitable. They were generous enough to help us out. They wanted us to win, and I felt that was a great perspective for the time. The product had real value for them.

Sramana: What happened after you became profitable?

Rob LoCascio: We just kept growing the company. In 2005 we had a watershed moment for the company. A couple of our retail customers started to use chat for trying to increase sales on their websites. That was really a different focus because previously chat had been used as a cost-savings tool. In 2005 websites started paying attention to Web analytics. They found staggering numbers. More than 95% of the people who put products in shopping carts would later abandon them. Only 1%–2% of people who visited a website would buy anything. They needed to use chat to increase sales.

Once we started to play with that, we realized that we needed to build a new section of technology in order to integrate chat with shoppers. We built a behavioral targeting engine that would enable us to look at all traffic on a website and analyze consumer behavior. When we found a consumer who looked like a buyer, we would invite the consumer to chat.

Today, about 25% of people who pick a chat in that proactive environment will turn into a sale. That changed our entire company. Now instead of being a cost reduction tool, we are a sales and marketing tool. Our company went from $20 million a year in sales to where we are today as a $130 million annual revenue company. We have 8,500 customers, including 400 of the largest online businesses. The sales portion of our business accounts for 75% of our business.

This segment is part 4 in the series : Surviving The Dotcom Crash And Building A Sustainable Business: LivePerson CEO Rob LoCascio
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