Building a Fat Startup: Apptio CEO Sunny Gupta (Part 4)

Sunny Gupta: Then came the fund raising. Greylock and Madrona were my prime investors. I started talking to them as I was validating the idea in the summer of 2007. I think their perspective was, “We have a lot of faith in you. Great teams can take a bad idea and make it into a great market and execution. Bad teams can take a great idea and screw that up.” They had a lot of conviction and faith in me but also had enough conviction in the idea. When it was time for fund raising, I ended up going back to these people and went through a partnering agenda. I could have funded the company on my own at that stage, but I decided to raise more money than less. We closed the first round Series A in a matter of weeks. That was a $7 million round. It was co-led by Greylock and Madrona. Mark Andreessen and Ben Horowitz were angel investors.

Sramana Mitra: $7 million in funding and you have about six people in a kind of co-founding team?

Sunny Gupta: Yes.

Sramana Mitra: What were some of the accomplishments with that Series A financing?

Sunny Gupta: If you raise a lot of money, you’re going to spend it. I was very paranoid about that. One of my learnings in my life as an entrepreneur has been that it’s all about the product-market fit. We had validated the market and the product idea, but we didn’t have a product that worked yet. We didn’t have paying customers who were getting value from the product. I believe, personally, that a lot of the mistakes in technology companies get made by not getting the product-market fit right. People veer too far off. There are a hundred features you want to put into this product and you don’t have time and resources.

The most important part which I’ve focused the team on was the V.1 service. We were thinking about a hybrid, either SaaS or running on-premise. He said, “You have to make a commitment to SaaS. The world is moving to SaaS and if you do it hybrid, you’re never going to get it right. Just pick a model and do it that way.” That was the first decision we made.

The second decision is we focused on a product market idea. I told the team that I want us, as a team, to spend less than a million bucks and get the first SaaS to market with five paying customers. We had started this in November 1^st. I wanted the first version out and customers using and paying for it by June. It didn’t need to be full-featured but I wanted to eliminate the product market risk. That’s what we did. We created this prospect advisory board. We flew out everybody into Seattle because I think we were getting random feedbacks from different customers of what they wanted us to do. I wanted to get nine or ten of them altogether in one room so we could get a consolidated set of feedback from these people.

We started developing the V.1 product. We did a lot of feature prioritization. We took the three customers who we had LOI’s with and we started working with them proactively almost on a weekly basis – showing early iterations of the product and starting to deploy the alpha version of the service back in March. Till date, I’m very proud of what we did. With less than a million of spend and a team of 15 people at that time, we delivered the V.1 to the market place and we had five paying customers by June of 2008. The financial crisis was in full flow when we were launching Apptio.

Regarding continued focus on the team, I wanted to make sure we beefed up the engineering organization. That’s where the early hires went. We also added a product manager to make sure somebody was thinking about the product and how we would go to market. Once we came closer to the June timeframe, we added two sales teams. The advice I’ve gotten in the past was that a lot of companies will just start with just one sales person. I’ve learned that if you hire only one sales person, you’re only captive to one salesperson’s perspective of the market. You’re better off having two to three teams in three different geographies because you’re starting to get different feedback of what it takes to sell this thing to address feature deficiencies. I don’t have the exact headcount but I think we were close to 20 people by summer when we were going into the market with five customers.

This segment is part 4 in the series : Building a Fat Startup: Apptio CEO Sunny Gupta
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