Bootstrap First to Exit, Bootstrap Again, Then Raise VC Money ALL from St. Louis: Stephanie Leffler, CEO of OneSpace (Part 4)

Stephanie Leffler: I remember Amazon called us about a year into this project and said, “How are you pushing so much work through Mechanical Turk?” We said, “We built this software platform to manage it, so it’s really easy for us to push a lot of work out there.” They asked us to come out and demo it for them. They were very impressed and said, “We’re trying to build a partner channel for this product. We need software providers like this to make our product more usable. Have you guys ever thought about going into business and selling the software?”

At that time we were like, “No, we’ve done the software thing. We’re in this thing now where you can just make money through advertising revenue. You don’t need to have any customers.” Two to three months later, we couldn’t get it out of our head. As our product got better and better, we thought that this is something that could actually impact the future of work.

The truth is, at the same time, our business model for the encyclopaedia site wasn’t working as well as we thought it would. If that would have been going gangbusters, we might have made a different decision. We were struggling to find the same efficiencies that we had with our shopping comparison engine. Advertising rates were lower for information and all sorts of things, but we did see this big opportunity with this tool that we built. The first step was to spin that off as a separate company and take a few resources.

Within about a year, we got our first few enterprise customers. We raised a round of capital with Highland. At that time, it was called Crowdsourced, but we’ve renamed it OneSpace. When we raised that round, we moved all of our people over to OneSpace. That was by the end of 2012.

Sramana Mitra: Let’s work back a little bit to the point where you made this switch from trying to hire people on Mechanical Turk to do research to that software that you built to manage that process. When, in this continuum, did that happen?

Stephanie Leffler: In January of 2011, that was the first time that we actually demoed the software to a client and sold. We sold it as a service but we showed them the software and said, “We can handle this project at scale for you.” That was the first time.

Sramana Mitra: How did you find this client?

Stephanie Leffler: It came from Amazon. Amazon referred almost all of our clients for the first year we were in business. A lot of people were going to Mechanical Turk, and Amazon, at that time, was struggling because people were having trouble with usability. They were seeing big customers with big needs come in and churn. Instead of letting them churn, they would introduce that client to us and we would use our software to make Mechanical Turk work a lot better.

Sramana Mitra: Interesting. In the first year, how many prospects did Amazon send to you? How many became clients?

Stephanie Leffler: They probably sent 25 and probably 10 of them became clients.

Sramana Mitra: What were you pricing this at?

Stephanie Leffler: The way we priced it at first was just as a service. A customer would come to us and tell us what project they needed. Let’s use you as an example. Let’s say you want people to edit your posts. We knew the market very well. We knew what we had to do to make your requirements happen. We give you a price per post and you’d have to sign a contract with us promising to spend a certain dollar amount within the course of the year. We would tell you how much each post edit would cost. We would do everything in the software for you.

The reason for that was that our software was built as an internal tool. We wanted to flip it and start selling to the best of our ability without  reengineering the tool for customers. We felt it was a good proving ground where we could then sell conceptually on the fact that we could do it. We could give the customer an SLA. This summer, we launched our first version as a SaaS. We’re finally at a point where we have enough use cases and enough volume where we feel like we’ve got a UI and a software that’s good enough to put in people’s hands. From that point until just a few months ago, we actually did all the work for the clients.

This segment is part 4 in the series : Bootstrap First to Exit, Bootstrap Again, Then Raise VC Money ALL from St. Louis: Stephanie Leffler, CEO of OneSpace
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