EntrepreneurshipSaaS

Pioneers get arrows in their backs

Posted on by Ed Sim

Pioneers get arrows in their backs – I have experienced it firsthand from an active investor's viewpoint and written about it in the past.  Being early in a market is great but being too early can be deadly.  Just like the settlers in the westward migration, entrepreneurs who are too early will get arrows in their back.  It doesn't matter if you have a rock star CEO (Bill Coleman who founded BEA) and $100mm of funding from some great investors.  If you are too early and have to spend lots of money educating a market and get engaged in long protracted sales cycles and pilots, you are not going to be able to spend your way to success.

That is what it seems like is happening to Cassat Software. Forbes has an article about Cassat nearing the end.  On the surface it seems like the company was built for the right place at the right time helping enterprises save tons of money and run their internal data center like a cloud.  However the first funding went in 6 years ago and has totaled around $100mm since then.  Here is a quote from their founder and CEO:

For many years, Coleman acted as something of a prophet for cheap computing via the cloud, but he also thought it would mean a sharp drop in pricing with which the big companies would not be able to compete.

"The big guys copied my story," says Coleman. Cassatt, he adds, was upended by a slowing economy and by customers skittish about closing big orders or changing existing ways.

"What frustrates me is my own naivete," Coleman told Forbes. "I thought I could give companies something radical that had a proven return on investment, and they would be willing to change all their companies' computer policies and procedures to get that. Right now, it's hard to get people to get beyond proof-of-concept tests or a data center energy analysis."

He will be right eventually but will not have a lot to show for it.  A couple points to make – raising too much money too early can be harmful as it puts huge expectations on a company before it has proven itself and selling million dollar plus licenses into enterprises has gone the way of the dinosaur as only the biggest companies can afford to do this and it is extremely expensive to do.  Remember some of my old posts about frictionless sales and leveraging the web for sales/marketing and inside sales?  Having just participated as an angel in the recent Eucalyptus funding led by Benchmark, we are hoping to avoid this fate leveraging free download model which has generated over 14 thousand users, many of whom are corporate customers.  In addition, we have signed partnerships and are bundled in the Sun cloud computing initiative and the new Ubuntu enterprise Linux release.  Got to love leveraging partners and downloads to drive sales leads and sales.

Published by Ed Sim

founder boldstart ventures, over 20 years experience seeding and leading first rounds in enterprise startups, @boldstartvc, googlization of IT, SaaS 3.0, security, smart data; cherish family time + enjoy lacrosse + hockey

6 comments on “Pioneers get arrows in their backs”

  1. Nice post, Ed. This seems like a great example of the importance of knowing what type of market you’re in (existing, re-segmented, or new), how the market type informs your approach to growth, and the customer development process in general (via http://bit.ly/1m4R1S).

    Customer validation – finding customers that will actually pay for your product, even an early version of it – is a key part of the customer development process. If you can’t find customers who will “get beyond proof-of-concept” tests and actually pay you, you definitely don’t have a repeatable and scalable sales process, which needs to be in place *before* you ramp up your sales and marketing programs. You can’t take those burned dollars back.

  2. Luke-good points. I know one of the first customers and while Cassatt did a great job working with them I believe what they ran into is a problem of market size-not enough large guys willing to pay big $$$. You are so right-can’t ramp sales before you have a repeatable product to sell

  3. The old Chasm. Have we learned nada? Medium business really, really needs and is ready for fault tolerant grids hosted remotely – yes these are clouds used for capital line of business (CLOB) applications. These apps usually run on medium commodity servers, and SME’s are aching to migrate to remote hosting if only one issue can be addressed: They need insurance against continuity disruptions. If insurers can’t price the risk, they can’t offer cloud clients coverage.

    You can extol the benefits of cloud all day, but if you can’t indemnify the central operations against failure or recover-ability, you can’t ask the SME to take capital applications, such as ERP and Supply Chain or POS, out of the server closet and move them into a cloud.

  4. Its strikes me that perhaps Coleman/Cassat needed to be wrapping up the IP and positioning for an acquisition by one of the big guys that Coleman references.

    If they really had something valuable, they could have delivered ROI to their investors with an acquisition, delivered something real to the acquiring organization (product and team), and put their product into an organization with the sales relationships & team to actually sell it.

  5. This is exactly what is happening in online travel. People are not accepting change and the industry is frozen in Expedia-time. Only two real changes gained acceptance:

    Tripadvisor – which took a 20 year old concept from the Usenet and modernized it and

    Kayak – which applied search to travel

    People still want the AAA guy to plan their trip.

  6. I was at a dinner party one night and repeated exactly the line you mention above (“pioneers get the arrows in their backs”).

    An older man sitting across from me (with obviously more accumulated wisdom) shook his head. “You’re wrong,” he said. “Real pioneers take that arrow in the chest.”

    As in, riding face-forward into the unexplored.

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