Scaling a Cloud-Based Disaster Recovery Business in Silicon Valley: Axcient CEO Justin Moore (Part 6)

Sramana Mitra: Can you walk us through the progression of how many partners you had in year one and so on. How did that number ramp up?

Justin Moore: I couldn’t tell you what the actual numbers were, but it grew rapidly and exponentially. We went from signing two partners a month in the first year to probably 20 partners a month in year three. Eventually, we got to the point where we had over a thousand service provider partners.

Sramana Mitra: What was the incentive structure? What was your pricing model?

Justin Moore: We basically did a revenue share with them. What we figured out was that they were both customers and partners in some ways. We priced to the partners and the partners marked it up or embedded it with other offerings. Instead of having a market price and then a partner discount, we actually just had a partner price and exclusively went through partners and allowed the partners to markup what they felt was appropriate given a certain circumstance or certain customer profile.

Sramana Mitra: I see. Initially, you had a revenue share. Was it 50/50?

Justin Moore: It wasn’t a revenue share. The partner purchased from us and then they sold to the customer. What they made in terms of margin varied widely.

Sramana Mitra: Across the board, you let them price however they wanted. Of course, that could result in pretty strange pricing models. How do you keep control of keeping the pricing in certain band or do you not worry about that?

Justin Moore: We didn’t really worry about it because we felt that if we train and educate our partners, our partners’ interest was to make money and build long-term relationships with clients. We were just one of many things that they were selling. It was never in their interest to overprice our offering to the point where the customers wouldn’t purchase it.

In fact, it was in their interest to ensure that a customer had our offering because it was the stickiest of offerings. Once you had everything embedded, you control the data and protect their environment. It’s easier to upsell other opportunities. Our partners were quite responsible at how they priced it. Usually, it wasn’t a line item in many cases.

Sramana Mitra: While all this is going on, is this bootstrapped or was there financing?

Justin Moore: We raised our first venture funding in September 2008.

Sramana Mitra: What were the metrics with which you raised the first round? What milestones had you accomplished before you raised that round?

Justin Moore: We had over a hundred paying customers at that time.

Sramana Mitra: Did you already have managed service provider partners?

Justin Moore: Yes, we had service provider partners. We had end user customers. We had revenue. We were not losing money. We were making money. In 2008, that was very unusual.

Sramana Mitra: That was very unusual, yes. Great. How much did you raise and from whom?

Justin Moore: We raised $6 million at that time. It was from two Silicon Valley firms. One is called Allegis Capital and the other is Peninsula Ventures.

Sramana Mitra: Why those firms?

Justin Moore: At this point, I’m still relatively young. If you go back to 2008, the amount of people who were in their mid to late 20s raising capital was never zero. People are like, “Aren’t you too young to be doing a storage play?” We actually got introduced to them through our lawyers. I had never raised capital before. I didn’t have a lot of VC connections.

This segment is part 6 in the series : Scaling a Cloud-Based Disaster Recovery Business in Silicon Valley: Axcient CEO Justin Moore
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