Startup, Survival, Scaling: Kareo CEO Dan Rodrigues (Part 7)

Sramana: What did you do, strategically, after you achieved profitability?

Dan Rodrigues: Once we turned the corner and made positive cash flow we re-invested it in our business by purchasing more advertising, buying another server or hiring another customer support representative. We started to grow the business slowly but surely. That kicked off act three of the play where we found a predictable growth model. The product was mature and we were able to scale, which was in 2010. We did around $4 million in revenue with 17 employees.

That was right around the same time that our original investor, Halsey, and expressed interest in having another investor purchase his stake. I had already started talking with a number of investors, including OpenView Venture Partners who bought out the stake of our original investors. From there until today we have just been growing very quickly. We did over $20 million in revenue in 2012.

Sramana: What changed to go from $4 million in 2010 to over $20 million in 2012?

Dan Rodrigues: We reached a point of maturity in terms of the product, how we sold it and how we supported it. At the same time there was an increase in demand for cloud-based solutions by doctors.

Sramana: Obviously, you are now hitting the style of growth that VCs are looking for. To get there you had to spend six years to get there.

Dan Rodrigues: We were obviously dealt some challenges early on. The product was not mature, and when we hit our survival years we got set back a few years. There were some interesting challenges along the way the prolonged the process.

Sramana: I am of the opinion that those challenges are what have allowed you to develop this company. I’m not sure you would have it today if you were not forced into those lean years.

Dan Rodrigues: I think that time was very focusing for us. A lot of the innovation in the way we develop and deliver our software came from those years. That allowed us to create some innovation.

Sramana: If you don’t know exactly how the market is going to play out then there is going to be a lot of trial and error. What is the right channel? What do customers really want? It takes time to figure them out. Venture Capital is the wrong kind of money to do that experimentation with. A lot of companies go out of business because they have taken venture money, and they do not have the luxury of experimentation.

Dan Rodrigues: It is definitely fun to get to the place where you are hitting consistent growth.

Sramana: Today if you have $10 million dollars to put into the company, you probably know exactly where to put it and how much money that would yield in returns. Once you are at that point, scaling is a money game.

Dan Rodrigues: That is absolutely right.

Sramana: There is an incredible obsession in the industry with raising money. I don’t think entrepreneurs begin to comprehend the consequences of that. None of us do when we start out. This has been a fantastic story, and I am delighted that you have hit your inflection point. Thank you for taking the time to share!

This segment is part 7 in the series : Startup, Survival, Scaling: Kareo CEO Dan Rodrigues
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