Bootstrap First, Raise Money from Kleiner Perkins Later: William King, CEO of Zephyr Health (Part 6)

Sramana Mitra: This, by the way, is also a trend. For the longest time, the buyers of IT were IT departments of corporations. Today and going forward, the buyers are much more going to be the business users. The marketing department, for instance, is becoming a huge buyer of IT and other departments as well. Everywhere in the organization, there are SaaS capabilities that address specific problems. The uptake of SaaS solving specific business workflows is huge outside of IT. IT is no longer the largest buyer of information technology.

William King: I love hearing that. You get to look across the landscape. That’s certainly what we hope. We’re seeing it in our buyers, but I love that that’s a trend. Another thing that we’ve done that I’m so proud of is we democratized the data. First of all, we wrangle all the data. We do all the heavy lifting. For the BI tools, when you talk to people who use them, they say, “75% to 80% of our time is spent wrangling the data.” 15% to 25% of the time, they’re actually looking at it and analyzing it. What we’ve been able to do is take that effort out and then present it in a way that a business user can make good use of. That is so powerful. That is where we get a lot more buyers.

Sramana Mitra: Let’s close on a few essential topics. First and foremost, how much money have you raised and how many rounds? What’s been the financing strategy? That’s one. Two, I’d like to discuss TAM. How do you calculate TAM? Three is competition.

William King: In 2013, we decided to take our first institutional money. I had a lot of interest in J&J in working with finance. I never raised money from institutional money from investors.

Sramana Mitra; It’s a whole other discipline.

William King: Exactly. I couldn’t agree more. I like numbers so I thought, “I’ll just intuitively get this.” I’d like to think that I’ve got smart people around me. I’ve gotten some advice that this is really a different kind of animal. We met a gentleman socially who is an investor. I came to like him and grew very fond of him. I told him that I was looking to raise money. He agreed to help. He also wanted to help at the board level. We did our first million dollar investment from him around mid-2013 to prepare for our institutional round. The institutional round is with Kleiner Perkins and Icon ventures. It was a $15 million round. First of all, that million dollar that we took and the guidance and expertise that he gave was tremendous.

Sramana Mitra: Who was the individual that you got that million dollars from?

William King: Gary Hromadko.

Sramana Mitra: How did that person get plugged into the company? How did you meet him and what was the context of his being involved in the business?

William King: Having lived on the East Coast, it’s such a friendly place. People are open and they want to chat with you. We met Gary was through an attorney who helped us with a lot of our incorporation. I met that attorney through a friend. The attorney helped us but he was more of a social friend. When I first met Gary, I thought it was just going to be social. After many discussions, both of us came to the conclusion that he could really be helpful.

Sramana Mitra: He basically acted as your mentor to help you learn how to raise money from top-notch VC firms in Silicon Valley.

William King: Yes, absolutely.

Sramana Mitra: That kind of a relationship where somebody knows what you’re doing is invaluable.

William King: Not only did he help with the process and the numbers, he also helped us think critically about who we want and why. What do they bring to the table? Writing a check is the easy part. Then you live with everybody. How are they helping the company? Are they hurting the company? Are they putting extra work on the CEO? I should say a lot of folks in the fund raising process are so keen just to get through that they don’t think taking a step back, “Is this the right partnership to help the company?” Gary was very helpful in that. Ultimately, I have to tell you I couldn’t imagine a better group of people helping Zephyr. Our investors are just tremendous. They genuinely, not just from an investment standpoint, have been transformative in terms of their contribution as people.

This segment is part 6 in the series : Bootstrap First, Raise Money from Kleiner Perkins Later: William King, CEO of Zephyr Health
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