Building a Fat Startup in Corporate Training: Karl Mehta, CEO of EdCast (Part 6)

Sramana Mitra: How do you charge? Is it a per user pricing model?

Karl Mehta: The pricing model is exactly like Salesforce or Slack. It’s a per user per month model. It’s close to $5 to $7 per user per month. It ratchets down with volume. If you have more than 10,000 employees, you get a pretty significant discount.

Sramana Mitra: When you start a significant account, what kind of deal size are you starting at? Is it $10,000 a month or $100,000? Where does the sales cycle begin?

Karl Mehta: Sales cycle begins with a very minimum commitment for as little as $5,000 a month. You get a pretty good experience of it and at the end of the month, you can either turn it off or add more users to it.

Sramana Mitra: You said you have about a hundred clients at various stages of adoption. How many of these hundred clients have actually seen the value go through a pilot cycle and chosen to expand deployment?

Karl Mehta: More than half of them are actually production clients. Production in the sense that they’ve already expanded. The rest of them are in a different stage.

Sramana Mitra: Coming on board basically.

Karl Mehta: Yes.

Sramana Mitra: When they expand, what scale do they expand at? What is the steady state value of a $5,000 pilot?

Karl Mehta: The $5,000 will get you access to about 100 employees in your company to begin with. That’s a good enough number because what we need in any kind of a network is a minimum of 100 people. Without that, the network doesn’t work. You can’t do a pilot and say, “I’m just going to put 20 people.” We specify a minimum pilot in terms of dollar amount and in terms of number of users to make it really effective. From there on, the steady state can go on depending on how many people they put in the second to fourth month.

Sramana Mitra: Very interesting. Excellent. You have been doing this for two years?

Karl Mehta: Yes.

Sramana Mitra: You’ve raised quite a bit of financing?

Karl Mehta: Yes.

Sramana Mitra: Three rounds.

Karl Mehta: No, just two rounds. The first round was Series A of $6 million. That was in the first six months of starting the company. It was from friends in the VC community. I wanted to not have too much pressure on getting the product out too soon because I wanted to build it for 12 to 18 months. It was a new category so it made sense to invest in R&D. To some extent, you can say that I violated the MVP rule.

Sramana Mitra: Serial entrepreneurs with track records are doing fat startups. I think you’ve done a fat startup as opposed to a lean startup.

Karl Mehta: Yes. We have revenue now. We have customers. A few months back, we got a significantly good round – $16 million Series B. That’s good enough for another three years. It’s good that my team feels that whatever happens in the outside economy, we can just focus on our work and not worry about next month’s pay check.

Sramana Mitra: Are you doing all of this in the Bay Area?

Karl Mehta: We have about 35 people in Mountain View, which is the headquarters. Majority of the development and technology gets developed here. We have an offshore centre in India. That’s mainly doing a lot of back office in terms of customer support and QA. We’re just starting to sell outside the US market.

Sramana Mitra: Anything else that you want to add to the story?

Karl Mehta: Well, you’ve asked most of the important questions. I hope that they’re helpful to your audience.

Sramana Mitra: Excellent. Keep in touch. Thank you for your time.

This segment is part 6 in the series : Building a Fat Startup in Corporate Training: Karl Mehta, CEO of EdCast
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