One Million by One Million | October 25, 2013

Building a VC-Funded Tech Company from Upstate New York: Sinclair Schuller, CEO of Apprenda (Part 5)

Sramana: I am a big fan of opening companies outside of Silicon Valley. I think there can be some definite advantages. For one, you did not have to fight the talent war that companies in the Valley have to fight.

Sinclair Schuller: After having started a company outside the Valley, I am also a fan of that approach. The only caution I would point out is that you have to be aware of the pitfalls. We were able to get great engineering talent, but we had a difficult time finding people with experience building companies. That is why we opened an office in New York City as part of our strategic growth plan. There are a lot of people there who ran sales and marketing functions for enterprise IT startups there.

Sramana: What were your major milestones after the NEA funding?

Sinclair Schuller: We persevered through a very difficult time for our company. Our strategy to build a beachhead with independent software developers turned out to be a bad beachhead. We went after companies that were making the transition to the software as a service model, and we hoped to license our software to them. We ended up in a scenario where the sales cycle was very long. We would take on an 18-month sales cycle and make $50,000 or $60,000.

That happened because it was a difficult decision for those companies to move to the cloud. They were worried about cannibalization, technical transitions, and other management concerns. All of those decisions were prerequisites for those companies to purchase our tech, and that slowed down our sales cycle. In addition, most software vendors do not have a budget to purchase software. They spend their budgets hiring people. That meant we had to really fight for budget and help them identify how they would spend money.

During that time we saw our original vision start to manifest. Enterprises started downloading our free product. We were not certain why, but when we interviewed a few of them, they told us they were trying to build a private cloud, and they felt we were well suited for that environment. When we asked them if they were funding the project, we typically heard that it was not funded yet but that they were putting together a pretty sizable budget for the effort. Ultimately, we used the Series A money to prove our original thesis and pivoted the company to focus on the original vision.

Sramana: How much time did it take you to get the enterprise business going in a significant way?

Sinclair Schuller: We closed the Series A in November of 2009. We ended up spending a year and a half pursuing smaller developers. We repositioned the company at the beginning of 2012. In mid-2012 we did a real launch into the enterprise market. By the end of 2012, we were landing low six-figure deals.

Sramana: How many customers do you have right now?

Sinclair Schuller: We have two dozen paying customers and a bunch who are in the pilot or POC stages.

Sramana: What demographic are you focusing on?

Sinclair Schuller: We focus on the global 2,000, and we tend to work with companies that have $4 billion in revenue and higher. Our average deal size will be in the $250,000 range.