Scaling to Profitability with $20 Million in Venture Capital: CloudShare CEO Zvi Guterman (Part 3)

Sramana Mitra: Let’s also understand how you apply the learnings you had in your previous company when you started this one. What did you do differently? How did you navigate funding?

Zvi Guterman: It was clear to me that the first market was going to be the US market. As soon as possible, I moved to the US with my family. Immediately after I got funding from Sequoia, I was able to move to the area.

Sramana Mitra: How did you get funding from Sequoia Capital?

Zvi Guterman: I’ll rewind a little bit. What I found out was that technology is a wonderful enabler but the business side has much more influence. I found out that I’m more excited about that part – building the company and hiring people. When I started CloudShare, I wanted to be the CEO and lead the efforts.

I was fortunate to have two wonderful co-founders. As we were based in Israel, we were looking for seed money in Israel. It was relatively easy in 2007. 2008 was more difficult. Timing was good. We were looking for a new developing market of cloud. We were also taking about SaaS model for enterprise. We decided to take $1 million. That was relatively easy.

Sramana Mitra: That was from which firm?

Zvi Guterman: Gemini. Sequoia has an office in Israel. They told us, “It is interesting, but it’s too early for us. Show us some results.” For the first year, we focused a lot on the product. We met with 300 potential customers mainly in the US. That really helped us. That allowed us to get the first customers. We defined the MVP with Gemini and implemented a lot of it. Alcatel-Lucent was a first customer. It was a meaningful enough deal of $40,000.

Sramana Mitra: By the time you had the Sequoia deal, you had paying customers. Your value proposition was proven.

Zvi Guterman: Yes, Completely.

Sramana Mitra: This is one of the big milestones that we constantly harp on. We have thousands of entrepreneurs that are on that phase where you’re very early. They have an MVP. They don’t yet have paying customers. If you can get to paying customers, there is a gigantic jump in your credibility. A lot of people are willing to talk to you at that point. There’s a big difference between not having paying customers versus having paying customers, which is why I gave you so many points.

Zvi Guterman: Yes. I agree. If you actually define your market and get to a point where you speak to 10 of your target audience and you get validation with seven of them, you are in a wonderful place. People in the States are usually polite. You give the pitch. At the meeting they say something very nice and tell you to come back if you have something. I usually say to entrepreneurs that they actually told you no.

What I found out is that many people in the US are super polite. They will avoid conflict. For an entrepreneur, you want to be at a different place at the end of this meeting. A wonderful result is if he says, “I have savings for my child’s college. Any chance I can invest them in your company?” That’s very extreme. There are other in-betweens. For example if they say, “Wow! Can I sign up?” If they start to engage with you in a better way, that’s great.

This segment is part 3 in the series : Scaling to Profitability with $20 Million in Venture Capital: CloudShare CEO Zvi Guterman
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