Bootstrap First, Raise Money Later: Ensighten CEO Josh Manion (Part 7)

Sramana Mitra: This is something that we are very much in alignment with. Our principle in the 1M/1M methodology is ‘Bootstrap first and raise money later’. The more you can do without raising money and the more carefully and more thoughtfully you can setup the foundations of your business outside of a venture clock, the better off you are in every dimension. You are essentially a great case study of exactly that philosophy.

Josh Manion: It sounds like we have a similar view on this. If I were meeting for coffee with an entrepreneur asking for advice, I would be saying, “What’s the fastest way for you to get a product to market and start learning from your customer? How can you do that yourself? What corners can you cut so that you can be the one who does that without going out and raising real money?” Angel money is maybe a little bit in the gray area depending on who it comes from. You’re never more efficient than when you’re spending your own money.

Sramana Mitra: No question about that. You raised money in 2012 and you raised a substantial amount.

Josh Manion: Yes, it was a $15.5 million round.

Sramana Mitra: What drove your thinking in terms of whom to raise that money from?

Josh Manion: It was interesting to think about it. The main criteria was the partner. We raised from a firm that’s based in Boston. We knowingly accepted the additional logistical pain that goes with that. They had been chasing us for close to a year. They had demonstrated some longevity in their willingness to stay in touch and looking us up when they’re in town.

Sramana Mitra: You had developed some relationship with these people. They were following your progress.

Josh Manion: We talked with others but the relationship element is important.

Sramana Mitra: You had $15.5 million Series A in 2012. What was the next move?

Josh Manion: Then the company tried to scale. It’s always challenging to change gears from being a bootstrapped company to a fairly well-funded one. There are certain cultural changes that take place whether you want them to or not. We went through that process. I really describe it as growing up as a company.

Prior to that, we had a Board, but it was informal. We just went into that stage of the company where you’re maturing in every aspect. You’re coming up with a real plan that you’re committed to. You’re scaling sales and engineering. 2013 was, on a whole, very successful but wasn’t without its ups and downs as we tried to figure out the right way to scale all of those different elements of the business.

Sramana Mitra: Team-wise, how much of the team did you have before this funding versus the ones you brought on after the funding?

Josh Manion: At the time of the funding, we had some of the team. Our CTO has been with us from the very early days. We added a leader in the supervision side of engineering. That was probably taking place in parallel to the funding. Our VP of Sales had been in place from a very early stage. He was actually one of our first two or three people. If I look at the current team, those are the players that we had. We were missing the CFO and then we added a President and a Chief Strategy Officer. If I look at the current team today, it was maybe half-formed.

Sramana Mitra: What about revenue scaling? How did injecting that much capital to a bootstrapped company that was already doing $5 million a year accelerate your story?

Josh Manion: The way I would describe it is, it allowed us to continue to grow. I looked at the market dynamics and thought, “This is really ready to take off but there’s no way that I can continue to take the risk personally.” That was one aspect of it. We knew what we wanted to do. We just didn’t have the fire power to do it.

The business continued to grow. We essentially doubled the business that year. At the end of 2013, we raised our Series B. We introduced a couple of new products. The most important one being the product called Activate, which solves the data problem. That was one of the original inspirations for starting the company. It gives the enterprise ownership and control over all data that’s flowing through their fingers. That brought in some additional dynamics.

When we set out to do that, we connected with Insight Venture Partners who eventually led our Series B. They were out of New York. Even though we moved the company to Silicon Valley, we seemed to raise money from elsewhere. Our Series B was $40 million. It was more of an expansion round.

Sramana Mitra: Did you take any liquidity for yourself or your wife?

Josh Manion: Everybody is fully in. For me, it’s always been a long haul play.

Sramana Mitra: Part of it is also that you had liquidity from selling the consulting business, right?

Josh Manion: That’s right. Between the A and B, we sold the consultancy. That took some of the pressure off.

Sramana Mitra: In terms of the new product and what it does to your business, I imagine that increases the average sale price and the deal size with each of your customer. You have an upsell opportunity to a much larger deal size. Is that an accurate observation?

Josh Manion: Absolutely.

Sramana Mitra: Anything else that you want to share?

Josh Manion: We raised the Series B a year ago. The business has accelerated even more. Now, it’s growing 150% a year. That’s also a function of what you just said. As the business scales and as the number of customers increase, so has the amount of upsell and the velocity of that upsell.

Sramana Mitra: You’re selling to an existing customer base a bigger product at a higher price. That’s a fantastic situation to be in terms of growth.

Josh Manion: Yes. That’s a unique set of circumstances that benefit us.

Sramana Mitra: Terrific. It’s been a real pleasure. It’s even more pleasurable because you’re from MIT. Good luck going forward.

This segment is part 7 in the series : Bootstrap First, Raise Money Later: Ensighten CEO Josh Manion
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