1Mby1M Virtual Accelerator Investor Forum: With Jason Lemkin of Storm Ventures (Part 4)

Sramana Mitra: Concur is one of the best examples of replacing paper. That has built a very valuable company. It went public on its own. It made the shift from being a license software company to a cloud company as a public company which is very difficult to do. It did very well as a public company and now recently got acquired by SAP for $8.5 billion.

Jason Lemkin: You might look at Concur and say, “How can I possibly compete?” What’s Concur doing now? $800 million run rate. There’s plenty of room at the bottom that you and I can get together and we can build a $100 million business and SAP wouldn’t even notice.

Sramana Mitra: Expensify is actually that.

Jason Lemkin: SAP bought Concur. They’re going to focus on the largest customers. Concur is very enterprise. As a Corporate Vice President of Adobe, I had to use it everyday. It was torture, but I had to use it. We can build another Expensify if it was epic. If it was 10 times better, we can build a $100 million today because SAP won’t even bother with that part of the market.

Sramana Mitra: Fair enough. This whole thing about the low end of market is very inserting for this global entrepreneurship. This is the segment of the market where you don’t have to sell in person. It has to be marketing. It cannot be sales. You have to acquire customers online. That, you can do from anywhere in the world. You don’t need to be in Silicon Valley to do these businesses.

This, by the way, is the genesis of Freshdesk. They went to many tens of thousands of customers before coming to set up their headquarters in San Francisco.

Jason Lemkin: I meet with so many entrepreneurs in the Bay Area, but they just come here from outside of the Bay Area. If you’re selling for $10 a month, you don’t need to be in Silicon Valley. Later, you’ll want local people to do support and customer success, but you do not need to be in Silicon Valley. If you’re selling enterprise deals, there’s a real advantage to be able to drive over to close the deal with Cisco or Google. For the low-ends, grow anywhere.

Sramana Mitra: BigCommerce has become very big from Australia.

Jason Lemkin: You don’t see a lot of those that are truly enterprise plays.

Sramana Mitra: For enterprise, you have to sell in person. We’ve seen companies come from elsewhere and set up shop either in Silicon Valley or, in some cases, Boston. Sitecore is a good one. One case study that I really like and has scaled extremely fast is the more recent company called Marketo that has already IPO’d.

Jason Lemkin: I know them well. John Miller did an event with me on how to hire a VP of Marketing. They’re pretty enterprise today.

Sramana Mitra: If you look at Marketo, the need for that workflow is all through the mid-market and small businesses. Lead nurturing is a process all of us have to do. If you’re talking about doing an arbitrage of an enterprise concept and implementing it for the low end of the market, Marketo would be a great concept to do that with.

Jason Lemkin: The broad marketing automation space has many vendors today. It’s probably not fair to simplify. Let’s call HubSpot a lower-end Marketo competitor. They were able to have a great IPO in the last month in Boston without a true enterprise sales team. They don’t need to be in the Bay Area. There are many others. Act-On is another. I do think Marketo has a huge advantage being in the Bay Area.

Sramana Mitra: Act-On, by the way, started in Oregon.

Jason Lemkin: It took them a while. You probably interviewed the CEO. I remember speaking with him at an event back in 2006. Do you know what the real secret to Act-On is? He didn’t quit.

Sramana Mitra: We have the Act-On case study. It’s an excellent case study. You mentioned HubSpot. HubSpot is still very expensive for very small businesses.

Jason Lemkin: It is.

Sramana Mitra: There’s a small business opportunity to do HubSpot whether it’s a concept arbitrage on HubSpot or concept arbitrage on Marketo.

Jason Lemkin: I agree.

Sramana Mitra: Any other things that you want to share?

Jason Lemkin: For the entrepreneurs that are getting going, be patient. Just shower those early customers with love. They’ll build your brand and you’ll learn from them. Spend more time in the early days with customers you have rather than acquiring new ones.

Sramana Mitra: Great. Thank you for your time.

This segment is part 4 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Jason Lemkin of Storm Ventures
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