Multiple Pivots, Taking on Giants, to Over $100 Million in Revenue: Matthew Calkins, CEO of Appian (Part 5)

Sramana Mitra: How many enterprise customers were you able to get in 2004? How were revenues scaling?

Matthew Calkins: I think we were growing at about 20% to 30% in those years. Our customer gain was never what we wanted but still steady and lucrative. In fact, we didn’t have a growth problem until 2008 when we were investing hoping for better results. Then we hit a few problems. We had a version that had a lot of technical problems. We were in crisis mode with some of our customers.

At the same time, the market was proving to be uninterested in buying. We had just a confluence of some difficult factors for a few years leading up to that. We had felt that we were spending all of our money being tactical and none of it to break out strategically. I think this was really the core problem. Our competitors were successful at forcing us to play against their strengths. They would have some features. They would all agree on it and build the same thing. They would convince the analyst that this was the feature you needed. This was the thing that they’d be talking about at conferences.

In many cases, we would just think that that doesn’t matter at all to us, but we couldn’t afford to follow our own strategy. We were between keeping up with the Joneses and satisfying the customers that had tremendous leverage over us because we were depending on them for our revenue stream. We were very reactive in the period from 2006 to 2008. In 2007, I solicited venture funding for the first time. I went out and did the pitches. I received the term sheets. I was so disappointed with what everyone was willing to offer that I just went with none of them. We stayed tactical and reactive.

Come 2008, I did it again. I decided to go back out and talk to some new ones. This time I went out without bankers. The bankers were incompetent. They were, materially, hurting us. They were disastrously bad. We had to  try it again. This time, I did everything myself. I did the pitch. I did every meeting. I did every phone call.

Sramana Mitra: What level of revenue were you at when you went out to seek financing?

Matthew Calkins: It must have been about $20 million.

Sramana Mitra: Was this before or after the financial crisis hit?

Matthew Calkins: It was before. We closed before the financial crisis. We were perceived as a very odd duck. We had this revenue. It was mostly services but we claimed to be product. Of course, the reason was that I was, more or less, giving away the product so I could pile on services. It was a low-risk cost model for our customers, but we were perceived as a services company.

Then the fact that we’ve never had venture funding made us strange. We might even have been perceived as not as able to play the game like others do because we didn’t start out like everybody else. We got just some puzzled expressions and people didn’t know what to do with us. It was remarkably difficult to convince venture firms to support us.

Sramana Mitra: Were you approaching firms on the East Coast or the West Coast?

Matthew Calkins: East Coast. I think I placed a few calls to the West Coast but I didn’t get much traction out there. We got some interest but not a tremendous amount. Since I had done all the meetings, I knew who I wanted. In the end, it worked out pretty well. We got a great firm.

Sramana Mitra: Who was that?

Matthew Calkins: That’s Novak Biddle Venture Partners. We took $10 million. They are a startup fund. They did Blackboard and they usually do smaller investments. I understood, at that time, that $10 million was the largest investment they had ever made. They are used to seed rounds. We were at the very high end of their bracket.

Sramana Mitra: What did they see? Given the landscape that you’ve painted that there are all these larger competitors who were getting lots of publicity in the market and your revenue line was mostly services, what did they see in your opportunity going forward that caused them to place that bet?

Matthew Calkins: I’m going to guess that they were judging by the quality of the people they met in the process of talking to Appian. Our business plan looked questionable. We were outgunned in a space that was growing at a moderate way. It was getting fairly old now and its promise was largely unrealized. I don’t think that they would have invested had they been judging us by the market or the company.

This segment is part 5 in the series : Multiple Pivots, Taking on Giants, to Over $100 Million in Revenue: Matthew Calkins, CEO of Appian
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