Scaling a Robust Enterprise Software Company from Chicago: FourKites CEO Matthew Elenjickal (Part 2)

Sramana Mitra: You said you did the startup right after your MBA. So did you then bootstrap it to launch this? Whom did you launch it with?

Matthew Elenjickal: I started the MBA program fully aware that I wanted to start a company. I was laying the foundation, if you will, when I was doing my MBA. I got a lot of free help. A lot of courses helped me really build a network of local venture capitalists. I got a lot of free money through competitions and stuff like that.

In the initial two years when I was in school, it was in a bootstrap mode. I was putting some of my own money and also the money that we got from competitions.

Then I met my Co-Founder. We went to undergrad together. He was in India at that time and is still there. He was in the US for some time though. I met him, reached out to him, and asked him, “Do you want to help me build everything?” He is on the technical side.

The initial prototype was bootstrapped. We raised a seed round as soon as we graduated. I got a term sheet the same day that I finished my last exam. The term sheet from a local VC firm – Hyde Park Venture Partners. We raised the money and put a team together. As you see, that was the beginning.

Sramana Mitra: What was your pitch to the Hyde Park guys?

Matthew Elenjickal: The same pitch I explained earlier.

Sramana Mitra: So you were clear that that’s what you were going to do already?

Matthew Elenjickal: Yes. That was pretty clear when I got into the MBA program. The prototype was built based on that idea.

Sramana Mitra: Let’s talk about what you did with that seed money. How much money did you raise in seed?

Matthew Elenjickal: We raised around $1.25 million in the seed round. Obviously, a lot of that went into product development. Even though we had a prototype, it was not production ready. We had to enhance it, which meant hiring more engineers, putting a small team together for operations, and everything else.

So it was a typical use of the seed round – building the product, hiring the initial team to get the first customer, and prove the product-market fit.

Sramana Mitra: What was the duration that took you to get to your first version of the product out and get to the first customer?

Matthew Elenjickal: I would say around eight months. We even went for a conference in the food vertical. It’s called Food Shippers of America conference. That’s our very first industry conference. It was in February 2015. That’s where we met our very first customer – Smithfield Foods.

They’re the largest producer and processor of pork in the country. It was a $12 to 13 billion company. When we met them at the conference, they were looking for a solution like this. Prior to FourKites, they had a team of 25 people filling Excel spreadsheets and calling trucking companies to send information to Walmart. It was that manual.

They were looking for a solution and they said, “Let’s pilot this.” We put our heart and soul into it and the pilot was successful. So they signed up with us around July 2015. From the time it started in August, I would say it took almost a year to get the first real customer signed up and use the platform.

Sramana Mitra: What was the size of the contract? Once you actually converted them into a paying customer, what size customer did they become?

Matthew Elenjickal: I can’t get the exact numbers, but let’s say hundreds of thousands of dollars about a year.

Sramana Mitra: At this point, the time frame that we’re talking about, are you still operating with the seed money that you had or did you raise more money?

Matthew Elenjickal: Yes, we’re still operating with the seed money – the $1.25 million that we raised in late 2014 and early 2015.

Sramana Mitra: You have started generating sizable customers at this point?

Matthew Elenjickal: Yes. In 2015, we had three customers. That’s all we had. We also got sued by an existing player in the industry in 2015. Even before we got the first customer, they tried to shut us down, but we won the lawsuit. We invalidated their patents.

So in 2015, we’re getting the first few customers, proving the product-market fit, and also winning that lawsuit. Those are all the major milestones that happened with the seed money.

Sramana Mitra: How long did it take you to fight that lawsuit?

Matthew Elenjickal: I would say almost eight months.

Sramana Mitra: How much money did it take?

Matthew Elenjickal: A lot of money.

Sramana Mitra: That sounds very scary for a startup to get slapped with a lawsuit that you have to fight on your own dime with all the legal expenses. That’s terrible.

Matthew Elenjickal: The good thing is, we had amazing backers. The Chicago startup ecosystem is very small. We had legal teams willing to give us profitable rates and even better payment terms. It was a collective effort.

Sramana Mitra: So in 2015, you end the year with those milestones. What happens in 2016?

Matthew Elenjickal: 2016 was a great year for us, especially from January to February. We were featured by Gartner as one of the core vendors and supply chain companies. They select five companies every year and we were one of them.

That really caught a lot of people’s attention including Bain Capital. They reached out to us and we had a phone conversation. They liked what we were doing and that gave us the series A process. We raised a series A in 2016 around July.

A lot of customers and CPG companies started signing over to FourKites. Some of them were already public.

This segment is part 2 in the series : Scaling a Robust Enterprise Software Company from Chicago: FourKites CEO Matthew Elenjickal
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