Zach Nelson and Evan Goldberg- NetSuite Keynote

NetSuite

Evan Goldberg

-        Founder, Chief Technology Officer, and Chairman of the Board

Zach Nelson

-        President and Chief Executive Officer

Founding in the Cloud  

Evan learned from running his own company that there was a dearth of good business software.  “I’d imagined that bigger companies had better software,” said Evan – but it turned out that wasn’t the case.  The whole company started in a five minute phone conversation.  Larry Ellison put in $ 1 million, and Evan put in $2,000.  

Its first incarnation was as “NetLedger,” with a more single-minded focus on accounting.  Larry Ellison suggested beginning with accounting because that’s the core of a company’s data.  In 2001 the company came out with an Executive Dashboard, committing to a suite format.

“It was the first cloud company”… $4.95 a month for customers.”  The company was motivated by the idea that “the kind of data you own defines your success.”

Managing Growth

In 2002, Netsuite’s revenue in was $3 million. Now, “every company is a cloud company” and Netsuite’s estimated 2014 revenues are $553.2 million.

Growth rates reflect where customers are betting the future.

   

Evan decided that he wanted to be the inside guy in a company, so he wanted to find an “outside guy” – so he brought in Zach as CEO and President.

Zach was looking for a company that was:

1. Web-based

2. Well-funded

3. Had a Great Development team

He wanted a company where “you could define what you think the future will be and then make it happen.”

Zach said, “The thing I’m personally proudest about is that we built a distributed company really quickly.”

-        Selling to the Fortune 5 Million (as opposed to the Fortune 500) requires that you reduce the cost of sale

-        This required moving outside Silicon Valley and significantly expanding their personnel

o   Now they have 3,300 employees around the world

-        Finding people who can manage in that environment is hugely important to their success.

NetSuite After IPO

-        They were one of the last IPOs of 2007

§  “In many ways it was good for us to go through the crash quickly”

§  “Many of the investments we made during the downturn are our second and third best sources of growth”

-        Shareholders are really important, especially when the people running the company are large shareholders, like at NetSuite.

-        You behave in very different ways when you’re personally aligned this closely with the company’s success.

Advice for the Next Generation

-        Vision is the most important element in a company’s success

-        Evan- We were driven by a “need to help small companies succeed”

Critical question is how do you bring the power of enterprise systems down to something that a normal human can use?

-        Now large companies are asking for the agility and flexibility of a small business, which means they need cloud capabilities.

-         “Every company is becoming a cloud company”

o   This helps disrupt industries like taxi cabs and hotels that nobody would’ve expected were disruptable

Q&A

“What happens after the cloud?”

-        Zach- “I truly believe that the cloud is it.”

-        “The question is what innovative businesses will be built on the cloud”

-         “It’s going to last much much longer than other architectures, so the question is what you should build on it”

“Do introverts not make good CEOs?”

-        Evan thinks he was the right person for early stages of the company. As the company grows, communication internally and externally becomes hugely important… you need to articulate a vision and inspire people. Partners can be huge in combining technical skills with communication.

“What directive did you ignore from Larry Ellison in order to achieve the success you have today?”

-        Larry is a font of ideas - he suggested NetLedger Personal, for personal finance

o   Evan looked into it “but it was a bridge too far”

“If you went with your initial gut idea about a web sales tool, could you have been Salesforce.com instead?”

-        Evan thinks that the Salesforce.com founders were the right people for the job – there are very significant technical challenges in that kind of tool. 

“As NetSuite gets bigger and mature, do you think innovation will stifle? How do you keep a startup mentality in a large organization”

-        They were initially concerned about not having anyone who’s run a $1B business, but they have the skilled, experienced entrepreneurs, which is something that many huge businesses lack.

-        They get great feedback from customers, which keeps them abreast of what businesses need.

-        They sponsor a company hackathon too, which brings out ideas that can be used in a business context.

-        The culture of their foreign locations can come into NetSuite too

o   Experience working in the Czech Republic changed their approach to change – now the company has a series of “musts” that guide priorities.

Accelerators and Incubators Panel

Panelists from across the country describe how to choose an accelerator and how they can help you grow your startup! #cyberposium

Panelists (from left to right)

Hugo Van Vuuren, Xfund (Moderator)

Semyon Dukach, Techstars Boston

Gareth Keane, Qualcomm Ventures

Gaurav Jain, Founder Collective
Jeff Engler, Rock Health

The growth of accelerators has been fueled by the low cost of starting companies and the desire for people to control their own destiny.

As an entrepreneur, you need be extremely selective about the accelerator you choose to join. The primary value that accelerators and incubators provide is the people you meet there.

A startup company is the most efficient way to solve our world’s problems. The goal of accelerators and incubators is to help entrepreneurs make this vision a reality.

When to apply to an accelerator depends on what stage your company is in. Accelerators are for executing, not exploring. In order to get value from an accelerator you have to know what you want to build.

What can we expect to see from accelerators going forward? Money-back guarantees, more vertical-focused (e.g. hardware, digital health), and a continual focus on seed stage investments.

Jennifer Fleiss (Rent the Runway) and Scott Friend (Bain Capital Ventures)

Scott Friend, Bain Capital Ventures:

• HBS alum, ProfitLogic founder
• Investment focus: Transformation of retail industry
• Early investor in RTR

Jennifer Fleiss, Rent the Runway:

• HBS alum, Rent the Runway co-founder

Founding Rent the Runway

• Jenny and Jenn had the idea while @ HBS; Now >300 employees, 250+ brands

The consumer dilemma: “A closet full of clothes, but nothing to wear”

• Other factors at the time: Social pressure with new social media trends + Fast fashion
• Started with trunk shows at Harvard and Yale sororities to prove the model worked and women had demand for it
• Designers had limited control over the pricing @ retailer, but their brand value is at stake

Early discovery: “Women have a transformative emotional connection with fashion”

Getting Funding

• Needed to invest early in a large number of dresses to test the model well; the RTR brand needed to feel aspirational, high-end
• Initial introduction to Scott @ Bain Capital Ventures
• What made them different: Highly professional, structured, thoughtful about what they were going to build and why
• What made the timing and execution different: There were tons of entrepreneurs founding ecomm businesses in 2009,but Jenny and Jennifer already had a proof of concept in their MVP
• What made Scott different for Jenny and Jennifer: Former entrepreneur who understood the challenges of running a business

Executing the Model: Jennifer's Perspective

• Priority: Get the site up in order to test the revenue model (HAD to be up by Holiday 2009, which was the peak of the season)

The first challenge: “How, as two non-technical people, can we get a website launched within 2 months? It was the first, most difficult component”

• To accomplish that, unsuccessfully searched for a CTO, then outsourced
• Started with an outsourced option, “which was our only choice at that point” -- the first one was a scam, and the second was ultimately successful

The second challenge: “The other piece was getting designed brands signed on… which is not a given when you're asking them to risk their brand equity.”

Executing the Model: Scott's Perspective

“Our thought was: let’s do as little as we can do on the technology side and just spend our time proving that the revenue model works. By 2009 New Years, we had 100% of our inventory sold out, and... we’d done our first-year revenue plan within 1 month"

• It felt and looked like a fashion company at the time, which made finding a technical CTO challenging because it didn’t look like the analytics and operations company that they were seeking -- even though it is now
• “Technology didn’t exist to run our reverse logistics process, which meant we would need to spend a lot of time and money buying something and customizing it, or building it ourselves.” (but tough to replicate)

The good news: “A big part of the bet was the assumption that if it worked, it would be really hard to replicate, both operationally and in terms of designer brands”

• Skepticism of the brands was challenging: “It tests how thick your skin is. You’ll get doors in your face, hear 'No' all the time”
• “We listened to what was good for the designer, what customers wanted, and we evolved the story as a result. We knew we just needed to get women renting dresses.”

The Future of Rent the Runway

“Our guiding light is always listening to customers. No matter what we’ve done… it’s always stemmed from what customer want.”

• Now a major focus is on the variables you can use to drive the average order price and conversion rates

• Scott's thoughts on their success: 
• “Jenn and Jenny were really thoughtful about the best things to do on the back end of the business at all times.
• “Almost every dress goes out the door on Thursday and comes back on Tuesday. From Tuesday to Thursday, somehow those dresses have to be evaluated, processed, cleaned, fixed, picked again, packed, and shipped. We are the largest dry cleaner in the world”
• “The other piece they were brilliant about was recognizing that we would have more data about customers than any retailer in the world. We’d know their size, style preferences, even their event calendar. But collecting that data and doing something with it was challenging -- How many fashion companies do you know that had one of their first hires as a Data Scientist?” 
• "Great entrepreneurs can get great hires and just get people to do stuff for them. The number of people who have offered advice or guidance over the years is a credit to Jenn and Jenny spending time on that." 
• They a great wealth of resources available at HBS; they got introductions to people outside the network, and also met with 80+ professors

Q&A
Question: What is the exit strategy? 

• It's always been about growing the business and keeping up with demand, but "things have finally settled; there aren't as many fire drills and the company is doing really well. We have time to think about where to head from here"
• "All the options for exit will remain open as long as we continue to build and grow"
• Scott: Sharing economy is becoming more the norm -- it's the tip of the iceberg in a way that it's proving to women that this is a good way to test luxury; 500K customers today is still <1% of the target market
• Scott: The name, the story, and the founders are incredibly compelling -- you can see then standing up in front of public markets and have that story resonate. 
• Scott: Profit per dress is very attractive and more so as you grow; this could be a standalone public company. 

Question: Scott, what have you invested in that has failed and why? 

• Even in cases where the business didn't work, the team was so attractive that they still got hired and acquired (Example: celebrity support for an app that was a "next-generation mobile Yelp") --  Just the nature of early stage venture investing 

"I have no idea why this particular company wasn't Instagram. The team was great, and Yahoo bought the company because they loved the team." 

Question: How will the "Internet of things" (e.g., iBeacon tech) impact the retail industry?

• Being an online first company gives you an immediate advantage because you have so much data on your customer -- Beacon is just one tech that allows you to further personalize your relationship with customers 

"Our shopping experiences are going to become way more uber-like over time -- retail is in a position to provide a similarly frictionless experience" 

Question: When will RTR pursue international expansion?

"There will always be shiny new things you could work on, and international is one of them at this point for us; having an investor, board, and team that keep you focused is helpful" 

• The other thing that makes international less attractive in the short term is how challenging the business itself is -- it would take years to get it right, and so many companies that have started replicas of RTR internationally have had trouble being successful