Building Large Scale Enterprise Software Companies: Louis Tetu, Founder of Taleo, CEO of Coveo (Part 3)

Sramana Mitra: In the case of HP as the anchor tenant, were they paying you?

Louis Tetu: They were in exchange for significant development capacity and applications suited to their needs. Of course, we had the framework for that. As I said, we went to them with a concept of digital competence profile. That was a significant value proposition to large companies, which is evidenced by the fact that by 2004, Taleo had 40% of the Fortune 500 as customers. Those companies deal with a lot of people and did that in very antiquated ways just by reading résumés and writing job descriptions. We thought there was a better way to perform the match as well as manage that supply chain. There was quite a bit of science behind it.

Sramana Mitra: In that early phase when you got HP as your anchor tenant and got Taleo off the ground, did you also put in some seed capital or did you raise venture capital at that point?

Louis Tetu: We put in the initial seed money. At various stages, we raised two large rounds of capital. We were successful in raising money in New York and Boston. The major round was done with Bain Capital. Obviously, we took the company public and raised substantial amounts of money and then subsequently did a secondary. By then, Taleo had more than $100 million in subscriptions. The novelty of Taleo was not only its innovation into the HR space with the digital competency profile, but also the fact that we were one of the early ASPs. You would know that as SaaS today.

Sramana Mitra: I do remember ASPs.

Louis Tetu: It was time sharing take two basically. We were one of the early software firms that basically put high-end enterprise software on the internet, and delivered that through our own infrastructure and data centers. There were no co-location services, and we had to build everything. Our infrastructure team was as large as our R&D team.

Sramana Mitra: The stack had to be built, absolutely.

Louis Tetu: For whatever reason, we foresaw the emergence of the Internet as a core delivery mechanism for enterprise apps.

Sramana Mitra: HP bought into that philosophy?

Louis Tetu: HP bought into that philosophy because there was a key rationale to it, which was essentially agility of deployment and the ability to pull all their worldwide talent information into, what’s called today, the cloud. Not only HP but also a bunch of other clients embarked on the Taleo story very quickly.

Sramana Mitra: These Fortune 50 early customers, they bought into the cloud story in the early 2000 timeframe?

Louis Tetu: You’re asking a very good question. Factually speaking, they actually did since we had such a market presence by 2004. They were paying us top dollars to do that. The reason why they did is not so much that it was in the cloud, it’s because we could offer them a model that was far more agile. The cloud, at that time, offered two key advantages. Number one was from a readiness and agility perspective. They didn’t need to deploy any server or software across the world. It was just online and ready. As long as we could prove that it could perform with a fair degree of performance and most importantly that it was very secure, we were fine—it was always a struggle at that time.

Then number two is it offered a licensing model that came at a time when a lot of companies had been burnt with large upfront license software investments. The whole notion that we would sell them a subscription and hence, be indirectly accountable for results because otherwise, they wouldn’t have renewed. We were dependent upon renewals. It created a fairly attractive value proposition. A lot of our customers embarked on board as a temporary solution. They used Taleo because they were in the middle of a 5-year deployment of PeopleSoft. Basically, Taleo could fire up an application that same afternoon. A lot of them looked at us and said, “We’ll use you in the mean time.” The rest is history. They never disconnected.

This segment is part 3 in the series : Building Large Scale Enterprise Software Companies: Louis Tetu, Founder of Taleo, CEO of Coveo
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