Serial Entrepreneur From Finland: Verto CEO Hannu Verkasalo (Part 6)

Sramana Mitra: The first year of being in the market was in 2012?

Hannu Verkasalo: 2013 was when we started building the product. End of 2014 was when we launched the product. Now we have had two full years in the market.

Sramana Mitra: When did Cisco come on board?

Hannu Verkasalo: They came on board in 2014.

Sramana Mitra: How many such customers did you have in 2015?

Hannu Verkasalo: In 2015, we had five. Last year, we were close to 20.

Sramana Mitra: All big customers?

Hannu Verkasalo: They were medium to big ones.

Sramana Mitra: Average deal size is in that ball park – $50,000?

Hannu Verkasalo: $100,000 to $150,000. We have a few customers in the seven figures and a bunch in the six-figure range.

Sramana Mitra: How do you figure out who’s looking for this? One of the problems with large companies is navigating the organization. What have you learned about who is the economic buyer and who is the technical decision maker in the sale?

Hannu Verkasalo: We are learning every single day. How we got started was by talking to people who I knew already.

Sramana Mitra: It comes from the market research side.

Hannu Verkasalo: Yes, for the companies that have been to the customer pool so far. Now, when we are onboarding customers, it’s not always the case. I think everybody should acknowledge that you should have a foundation and a pool of expertise in a certain domain. I guess that’s how we started. To grow and even to address the right customers, you need a wider pool of people in the management team. We have found out, over the last 12 months, that there are actually many other verticals we should target. You don’t get that if you only hire people like you. That variety in the team is a key.

Sramana Mitra: Have you raised more money since the one million that you put in yourself?

Hannu Verkasalo: We have raised more funding outside. We have raised, all together, about $24 million.

Sramana Mitra: That’s a lot of money.

Hannu Verkasalo: We did a seed round, Series A, and Series B.

Sramana Mitra: All in New York?

Hannu Verkasalo: No, all in the Nordic countries. We had Swedish and Finnish venture funds. It’s not to say that the folks here in the Valley wouldn’t have been interested, but it’s not easy to get a Menlo Park investor to invest in Helsinki. There are pros and cons. We have stayed in Finland. We have found enough capital in the Nordic region. Talking about our next round of funding, I think a big US investors can help more.

Sramana Mitra: Why do you need so much money? You’re working with large customers and they’re paying sizable deals?

Hannu Verkasalo: This is a business model where we need to invest, heavily, into the panels. We collect data from these panels. We need to get consumers into the panels so we can collect data. That’s the core part of the service. To do that, we have to invest money. We have to recruit people. We have to advertise. It’s a very capital-intensive business.

Sramana Mitra: Is your revenue tracking commensurately to this level of funding? Are you getting enough revenues to justify this kind of funding?

Hannu Verkasalo: No. The attractive part here is that when we execute well, this is a very scalable business model. In the long-term, the costs are quite fixed against the revenues. At the same time, it’s a monopolistic industry. Somebody is going to claim a status as the currency of consumer-centric measurement. The downside is you have to invest a lot of money to get any data collected.

We got Cisco as the first customer. Even before that, we needed to invest a couple of million dollars on the product and $3 million on the panel. The nature of the business is that we invest more in the panels. The good thing is that getting new customers in doesn’t affect the cost base. All the new customers are bringing in incremental revenue. This is the scalability part. We feel that to pull it off, you need a great team, a great product. You also need capital.

Sramana Mitra: This is a business that is not doable without lots of capital.

Hannu Verkasalo: This is not a business that can be easily bootstrapped.

Sramana Mitra: All right. Good luck. I hope it all plays out.

This segment is part 6 in the series : Serial Entrepreneur From Finland: Verto CEO Hannu Verkasalo
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