Sramana: How were you able to keep Responsys above water when so many of your customers were going bankrupt?
Raghu Raghavan: I believe there are two reasons why, and I will explain them with examples. First, by working with eToys we discovered that if a company has a marketing system, it will place tremendous value on its marketing list. It will use the marketing system as long as it can to keep the company alive. We knew eToys was dead, so we mandated that it pay us up front with a cashier’s check each month. It kept paying.
Second, there was another customer we had abused. We had a service outage and they should have left us, but they didn’t. A lot of it had to do with the fact that we did data integration. Once you have deep database integration, customers don’t leave.
Sramana: What eventually happened to Responsys?
Raghu Raghavan: It went public in April of this year. It was one of the first five IPOs of the year. It does about $110 million of revenue a year with a $500 million market cap.
Sramana: Why did you leave Responsys?
In 2001 I took an extended leave of absence when one of my children got ill. I was the CTO, but I took off for two and a half years. The company dealt with some bad governance. It changed CEOs and brought in a guy to take the company public in late 1999. When the market flattened, he decided to make his mark by doing acquisitions. He repeatedly made disastrous acquisitions so he was fired, and his successor did not fare much better.
In 2004 one of the board members called me and asked me to come back. It made sense to come back because the company was on its knees, and it could not sell or get a CEO without a founder. When I came back we had some offers to sell the company but we passed. We ended up hiring Dan Springer, who is a fantastic CEO. He was just what the company needed. We got a great CMO in Scott Olrich. Those two stabilized the company. When they came in the company was doing $50 million in revenue.
At that time I was thinking of retiring because there were no financial issues for me. However, entrepreneurs have the urge to build. I then ran into Subrah Iyar and we started chatting about churn. He mentioned that if he could reduce churn by a few points, his ramp would be a lot higher. My response was that we should have had huge churn at Responsys but we only had a 5% churn rate because we had so much data integration. The conversation then turned to a ‘what-if’ scenario, and we explored ways to use data to make WebEx customers stickier.
A week later we talked again, and I pitched an idea about developing behavioral profiles of WebEx users. If you were then to run a future webinar, you could treat the potential attendees differently. When I looked at the problem carefully, I realized that the environment had changed a lot since I had last looked at it. I was shocked to discover that Salesforce had become the database of record for marketers. When I talked to salespeople, I heard interesting stuff. They did not like the idea that someone took their entire sales database and used it for marketing, they wanted them to take only the aspects they needed. I heard horror stories about marketing turning all the sales leads into non-leads.
I then theorized that I could build a system to run online events using WebEx where the person running the event did not have to worry about setting anything up other than their organizational processes. We could build the databases around the processes. We wanted to make that the user experience. That is how we started.