Bootstrapping a Billion Dollar Unicorn with Services from Utah: Dave Elkington, CEO of InsideSales.com (Part 4)

Sramana Mitra: Let’s get down to the specifics. We understand iteration. We’ve heard this many times. It’s part of our philosophy as well in terms of the methodology of how we train entrepreneurs. We are completely on the same page with you. Specifically, what were you selling? What was the segmentation emerging out of this process?

Dave Elkington: We built a lead management platform – not a marketing lead management but a sales management solution. We had all the expertise. We built a web database platform that was designed to help companies with, particularly at that time, web marketing-generated leads that they wanted to hand over to their sales team. We built automation tools for them like dialling, click-to-call, and emailing tools. A lot of the marketing automation that you would provide to marketing, we actually then took those concepts and applied them to salespeople and then built a platform that, most particularly, inside-sales reps would consume.

It was delivered on a per user per month basis. We just modelled it on other successful models. We were looking most particularly at Salesforce.com. We looked at their pricing. We were not really a competing solution, but we were a complementary solution. We felt that we need to be priced at a discount off of that. We used their pricing as the market of what people are willing to pay for monthly subscription. We were about half the price initially.

Sramana Mitra: Let’s say I’m a Salesforce.com customer. What additional value and capability was I getting by paying another 50% to you?

Dave Elkington: It was around productivity for the inside seller. This is an appointment setter. This is a close or an account manager. We were driving more activity with less effort. We could go to an organization who was doing maybe 30 contacts in a given day. We can go in and double or even triple that. It’s going to cost you X but you’re going to sell 30% more or 100%. We were really using the free trial approach. We had to go in and prove our value. We were very engaged to make sure that there was value. They would do more engagements, more conversations, and more responses.

Sramana Mitra: That was because of what? What was in the product that allowed that kind of ROI to be delivered? Is it because the product was an automated appointment setter? What was the functionality?

Dave Elkington: Ultimately, a rep would login to their CRM. Our system would allow automated communication. I’ll walk you through a simple use case. I’m ready to follow up on my activities or my leads. I click a single button. Our system has an algorithm to prioritize who they should be talking to, open the record, and deliver the phone call. Let’s say it’s somebody’s answering machine. Our system would find the next best person for them to be talking to; while in the background, they’ll be leaving a pre-recorded voice mail in that rep’s own voice on that prospect’s answering machine. They’d be talking to the next person while the voice mail would be saying, “This is Dave. I saw you on our website earlier. I thought I’d call to see if I could follow up with any questions you may have.”

We were doing multi-variate testing on these voice mails. It would then send a subsequent committed email with a case study that may have been committed to in the voice mail. It was like marketing automation but it was being delivered to the sales rep. It was a sales automation solution.

Sramana Mitra: How long did it take you from where you started down this path? How long did you arrive at, what we call, a product-market fit?

Dave Elkington: It actually took a while. We had initial fit by the summer of 2004. It probably took six months to really get into the groove. This was the first version of the product fit. It was a loose fit where people were comfortable buying it. We weren’t doing massive amounts of customization. It took another two years to where we really built a robust solution. The first one was a very light solution. Even probably two years after that, the market caught up and demand for what we did really took off. We were selling ahead of the market. We sell a toolset that’s most predominantly used by the inside sales rep. Inside sales was still a very fluid thing from 2004 to 2008. What I mean by that is it wasn’t even called inside sales at that time. It was called telesales or remote sales. Our users weren’t call centres. These are true enterprise sales reps that make $120,000.

We bought the InsideSales.com domain around December 2004. If you’d have Googled the term ‘inside sales’, it would have been 20,000 job listings but there were no vendors selling into that. We put up the domain. We had eight or nine leads on the first day with no advertising.

It took really four to five years before inside sales became, not just the defacto name of this department, but it took that long to really cross that chasm to where companies began to really deploy large inside sale organizations.

Sramana Mitra: What was the revenue like when you were going through this phase where inside sales, as a terminology, wasn’t still adopted. One of my really close friends actually was one of the pioneers of telesales. She was one of the very early employees of Oracle. She founded Oracle’s inside sales organization and went on to found a company called Phone Works.

Dave Elkington: We actually went down in revenue that first year from a million to $400,000. We began to decrease the pro services revenue. We began to double or close to double every year thereafter. We went from $400,000 or $500,000 to $1 million. It wasn’t quite 100%. It was more around 80%.

Sramana Mitra: All still organic growth?

Dave Elkington: I think at one point there was a summer where we’re almost dead. I went to my in-laws. I think my mother-in-law put in $20,000. We maxed everything out.

Sramana Mitra: How many people did you have in the company at this point?

Dave Elkington: Depending on the year, 30 to 60. It was not a huge number.

Sramana Mitra: 30 to 60 people is not necessarily a small payroll either.

Dave Elkington: It was the most stressful time of my life. When you hire somebody, it is one thing if they’re not performing. If I can’t pay them because of a mistake that I made, you’re making a commitment to your employee just as they’re making one to you. You can’t not make payroll. We were very cautious in our hiring. First, it was monthly contracts. Then it became annual contracts. If I could sell $2,000 monthly recurring revenue, I would then hire somebody that I would spend $2,000 a month for. It was very tight.

An interesting thing happened. By about 2010, the market changed. All of a sudden, the approach to inside sales became an accepted approach to generating revenue at a company. The demand for what we did really increased. In the process, every six months, I was always talking to potential investors. Sometimes, I get term sheets and sometimes I didn’t. I wasn’t willing to take any money that in any way diminished my ability to manage the company and build the company in the way that I felt was the right thing to do. We probably had 10 term sheets over the year but nothing that felt right.

One of the things we found is if you could call a marketing-generated lead back within five minutes, versus five hours, you are 3,000 times more likely to move into the sales pipeline. By 2010, something happened in the market. The demand for what we did surpassed the capacity of our ability to deliver. I would go to trade shows. There was a guy who came to me and said, “I love everything you are espousing but you’re a hypocrite.” He said, “I filled out my information on your web form several times. Over three weeks, I can’t get a sales rep to call me back. You’re not practicing what you espouse.” I said, “You’re right. I’m sorry. I can’t keep up with the demand that we do. We’re hiring people and getting up to speed too slowly. I can’t hire before I have the money to hire them.” He said, “Listen. I will buy your technology anyway because no one else is doing what you do. You need to know that there is a perception that is inconsistent with what you’re teaching.” It was really that experience that led me to go raise money.

This segment is part 4 in the series : Bootstrapping a Billion Dollar Unicorn with Services from Utah: Dave Elkington, CEO of InsideSales.com
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