Serial Entrepreneur From Finland: Verto CEO Hannu Verkasalo (Part 5)

Sramana Mitra: Let’s take this step by step. You had this conversation with Facebook and it triggered a thought in your mind in 2012.

Hannu Verkasalo: Yes.

Sramana Mitra: How did you get the company off the ground? You had capital, so you could start it on your own.

Hannu Verkasalo: That’s right. I put in a million dollars and started building a technical team. These were people I knew from the past.

Sramana Mitra: From Finland?

Hannu Verkasalo: From Finland.

Sramana Mitra: Did you bring them here?

Hannu Verkasalo: I brought them to Bay Area for a moment.

Sramana Mitra: But your development team was in Finland? Smart. It’s very hard here. The talent war is crazy. Having an unfair advantage in terms of talent is helpful.

Hannu Verkasalo: One of the downside of the Bay Area and many other areas in the US, including the US, is the expense. You have these folks who jump every six months. It’s challenging to have loyal people.

Sramana Mitra: It’s very difficult to build products without loyal employees who’ll stay through, at least, some amount of product cycles.

Hannu Verkasalo: Exactly. We started building the technical team in Finland. I did start building the technical team here in the US. To be very clear, for the first two years we were very focused in Helsinki just to build the product and get the product to the market to get lead customers in. The first lead customer was Cisco here in the Bay Area. We, all the time, remained in deep conversations with the lead customers here.

Sramana Mitra: Based on what you were doing, why was Cisco the lead customer? I wouldn’t have guessed Cisco would be the lead customer.

Hannu Verkasalo: They were doing something very much related to this. They were trying to understand how mobile usage is evolving. They had been struggling with some of the early vendors to get the right data in. They invest in market research.

Sramana Mitra: I understand they invest in market research. What kind of mobile information were they trying to gather? What were the key questions around which you positioned your Cisco engagement?

Hannu Verkasalo: How much data are mobile subscribers creating? Is that going over WiFi or cell networks?

Sramana Mitra: So network traffic related questions.

Hannu Verkasalo: Exactly.

Sramana Mitra: What was the size of that engagement? What kind of money was Cisco willing to pay for an engagement like that?

Hannu Verkasalo: For the first engagement, they were willing to pay $50,000 to get data from us. It was more about having a stamp of approval.

Sramana Mitra: $50,000 is plenty of money to get a large marquee customer on board and completing successful customer engagement.

Hannu Verkasalo: It’s a snowball.

Sramana Mitra: Lifetime customer value is going to be huge with the $50,000 start.

Hannu Verkasalo: I can tell many examples from Finland where they have a great technical team but they are within the office for three years. They never get the lead customer. I think it’s a balance. How early are you going to take stuff to the customer? How much do you want to fine tune the product? In Finland, for example, there are folks who raise $10 million in funding and fine tune the product for five years.

Then on the sixth year they ask the customer, “Is this interesting?” The customer says, “It’s totally stupid.” You have to be somewhere in between. If you have a reference, that will lead into new customers coming in. It’s easier to call Qualcom by saying that Cisco is already using the data.

Sramana Mitra: Marquee customer name is of immense value. You followed the same model of starting midsize engagements with a bunch of marquee customers?

Hannu Verkasalo: Yes. We have been scaling and growing the size of the business. We’ve been very focused on these big name customers like Netflix and Yahoo!. The price points are high. It’s not always the most scalable way to build a business, but it certainly has brought in enough money and attention. We think it’s a good way to build a business.

This segment is part 5 in the series : Serial Entrepreneur From Finland: Verto CEO Hannu Verkasalo
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