Bootstrapping to $12M+, Getting Ready to Raise Money: MindTouch CEO Aaron Fulkerson (Part 5)

Sramana: What is your pricing model?

Aaron Fulkerson: We price based on the value derived from the implementation, which is what I love about SaaS. You have to earn your customers’ business. If you don’t, then they turn you off. I have tried to make our pricing model entirely value based and tie the cost of the license to have value proposition. Our pricing is typically based on the number of agents or authors used by our clients, not the number of customers that our clients have.

Sramana: In term of your evolution from 2008 until today, what are some of the key strategic decisions you have made which have helped you achieve success?

Aaron Fulkerson: It is critical to prioritize what is important. I see young companies struggle to prioritize what is truly important. It is too easy to spend a lot of resources on things that just don’t matter. An investor, advisor, or big customer can easily derail your momentum.

Sramana: You said you were being advised by potential investors and made mistakes based on their input. Can you talk about that in greater detail? We see investors misguiding companies quite a bit. At 1M/1M we use customer input as the first principle.

Aaron Fulkerson: In my early days I sought out advice from the investors because I thought they really knew what they were doing, and in reality they don’t. They, like humans, are pattern recognition machines. Investors are trying to parse through a ton of data and categorize accordingly. That is helpful if you are trying to disrupt an existing market. If you are doing something entirely different, then it is very distracting. You need to focus on what problem you are solving.

I’ll give you an example to illustrate. I received a lot of positive feedback about the product and then was asked what we were going to do about video. This was in 2006, and YouTube was very hot. I came back to the team and told everybody that we needed to do something with video because everybody had asked about it. Fast forward a few years, and we had the same conversations with social networking and social profiles. After that, the trend was gamification. Everybody was convinced that we needed to have a play there as well. Industry and society will go through cycles where things are super-hot, and those trends almost take on a life of their own.

Sramana: When investors look at investment opportunities, they are contemplating putting them into their portfolios. Entrepreneurs are looking for life, and investors are looking for five deals.

Aaron Fulkerson: Investors are looking for five deals, and they have dedicated buckets in which those deals need to occur.

Sramana: They need to invest in categories that are producing hot companies. They are not the ones designing the products; they are managing portfolios. Taking product input from portfolio managers is a dangerous thing to do.

Aaron Fulkerson: I totally agree. Entrepreneurs need to focus on creating generative value for their customers. There are plenty of hot companies that were deemed successful that never made a dollar.

This segment is part 5 in the series : Bootstrapping to $12M+, Getting Ready to Raise Money: MindTouch CEO Aaron Fulkerson
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