1Mby1M Virtual Accelerator Investor Forum: With Jason Lemkin of Storm Ventures (Part 2)

Sramana Mitra: Am I hearing that when you look back on EchoSign, you feel that you sold too early?

Jason Lemkin: I think it was a lucrative and fair financial transaction. What I didn’t realize until I got into Adobe is that the team would accelerate after that. I didn’t realize that the team was just getting good and that the team was coming into its own.

When you have a great team, once they cross that initial scale, no matter what the world throws up against you, you cannot be killed. Adobe is great, but it didn’t have anything to do with the brand. It all had to do with the team and a little more capital. I couldn’t see it before. No matter what anybody else does, it doesn’t matter once you’re at $10 million, growing at 100% or more.

Sramana Mitra: Let me bring a little bit of perspective from our program. We do have many companies that have actually hit the $1 million to $3 million points. One of our companies, which competes with one of your portfolio companies is Freshdesk. Freshdesk has hit $10 million and they have 30,000 customers.

However, we obviously deal in huge volume. We have a large community of entrepreneurs. We have a very large international community of entrepreneurs. I’m going to underscore this for everybody who’s listening. The pace of adoption is not the same.

In Silicon Valley, hitting $1.5 million in two-year time is realistic. It is not necessarily realistic around the world. If you’re building a company in India or Buenos Aires, these numbers have to be adjusted to fit the realities of your market unless you are selling to the global market and you’re using online customer acquisition mechanisms. In which case, things do often accelerate.

Freshdesk got to those numbers fairly quickly and has accelerated at the Silicon Valley pace, but that is not true of all companies. The ones who are bootstrapping and who do not have a lot of marketing dollars to work with and who have to be very creative about customer acquisition, you have to take those realities into account.

The point that Jason is making is interesting. Whatever it takes and however long it takes, you have to stay with it. You cannot give up. If you give up, then the game is lost.

Jason Lemkin: I was confused when we started EchoSign back in the early days of Web 2.0. People confuse B2C and B2B, especially if they have a low-end service. If you’re building something for consumers and you want to build 78the version of Twitter, you just throw it away if you don’t hit it in a year. You need this epic viral loop to make it happen.

But if you’re selling to businesses, you’re going to need a minimum of 24 months whatever your scale is. You need 24 months just to figure out how to sell the product. Selling the product is much harder than getting users. Selling the product and getting that customer to recommend you to another customer, that takes time.

If you give yourself 12 months, your odds are about one in a thousand. If you give yourself 24 to 30 months, your odds go up by an order of magnitude. It takes time to buy something. If you make the world’s perfect free game, you’ll get the next Flappy Bird. It never happens in B2B.

Sramana Mitra: Because we deal with huge numbers and in a global environment, we tend to advice people not to play that valuation-without-revenue game – trying to hit some sort of a luck that is going to get you a great acquisition where your business model is your exit strategy. It’s too unpredictable and you can’t really plan for anything.

Jason Lemkin: I now work with a lot of companies that sell across the world. There are more and more Freshdesks. I’m an investor of a company that’s close to $10 million. The vast majority of its revenue is outside of the US. Half of it is in emerging countries. I invested in a company called Talkdesk that will hit $5 million this year. It’s out of Portugal. By next year, the vast majority of revenue will be North America.

I agree with you, but I think all the stuff is getting more global. I know that if you’ve got a web app in Venezuela today, your market is smaller than it is when you’re in San Francisco. Everything is bigger. Competition is harder, but all markets for SaaS are bigger than they were just a couple of years ago.

This segment is part 2 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Jason Lemkin of Storm Ventures
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