Building an Analytics Company to $10M+ in Revenue: Mode Analytics CEO Derek Steer (Part 4)

Sramana Mitra: The methodology that we follow is, bootstrap first to raise money later. Get to validation and then raise money, partly because this option of raising money remains only if you can raise friends and family money somehow.

For the numbers that we work with, most people don’t have those options. That’s why, pragmatically, it’s not very doable for most people. We are in 2013. How much money did you raise from your Yammer bosses?

Derek Steer: We raised over $500,000.

Sramana Mitra: How long did it take you to release something whether it be a minimum viable product or a version one product? 

Derek Steer: We got something out in less than a year. I think it took nine months. It was barebones. I think it was faster actually. When you have your first customer, you now have an obligation to them to do some of the things that they want from you.

You expect them to help you shape your product. You also have to maintain the product for them. You have an obligation to make sure it works and is effective. That can sometimes slow down the testing of new ideas. When you are inventing something new or something deep and challenging, being publicly and commercially available in the market can be a challenge.

It’s always hard to know if we released the product at the right time. I think we could’ve moved faster if we had continued to build on the path that we were on before releasing it. To get into the next financing round, we needed to get to revenue traction quickly.

This is another place where it’s a good thing for entrepreneurs to think deliberately about the right time to release the product. You can also consider going to market privately with a few early design partners that fund your company in a consulting type of way.

One of the companies in our space that did this was a company called Fishtown Analytics. They make a product called dbt, which is a great way to model data and to create a source of truth around your data within a database. 

Sramana Mitra: A lot of companies have followed that principle. We use that methodology a lot. We call it Bootstrapping with Services. One of my favorite case studies from your space is Alteryx. I did the case study of Alteryx in 2013. I know them very well. It’s a fabulous case study of this multi-billion company that was done exactly the way you are describing. 

Derek Steer: I think more than $10 billion now. That’s a good way to find market demand very quickly, which is the most important thing. Funding does not help you find demand at all. If anything, it can be a hindrance to that. 

Sramana Mitra: Let’s go back to your situation. You did release something without doing that kind of discovery. How did it all play out for you?

Derek Steer: Our first customer was Twitch – the video game streaming platform. They are still a customer of ours today. I am very proud of that fact. A lot of our early customers were the aspiring Facebook and Google of the world so folks like Lyft. They’re one of our marquee customers today where Mode has grown up with them.

The Twitch is one that I love. We were working in a co-working space called Rocket Space in 225 Bush Street, San Francisco. Twitch’s office happened to be in the same building. This was June or July of 2014.

We did the TechCrunch press of course where we announced our release and funding. Someone at Twitch reached out and said, “I was going to build this on my own, but it looks like you just released it. Can I use yours?” We said, “Sure, we’ll come visit you.”

When they told us where they were, we were surprised to find out that we were in fact in the same building. Later that day or the next day, Spencer from their team decided that he was going to come and visit us at Rocket Space. He sat down with our six or seven-person Mode team and talked to us about security and other things he cared about.

He left the conversation, went back upstairs, got Mode running and the rest is history. From there, we did an open beta, which was free for the first six months. Then we started figuring out how we were going to charge people for this product. We were figuring out what would be the effective mechanism for it and how much it would be worth. 

This segment is part 4 in the series : Building an Analytics Company to $10M+ in Revenue: Mode Analytics CEO Derek Steer
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