20VC Is Series B Really The Hardest To Raise Should The Only Limiting Factor Post Series B Be Cash & When Is The Right Time To Move To The US with Nicolas Dessaigne, Founder & CEO @ Algolia



In the latest episode of "20 minutes VC," host Harry Stebbings interviews Nicholas Dessain, co-founder and CEO of Algolia, a rapidly growing SaaS startup that recently raised $53 million in a Series B round led by Accel. Dessain shares Algolia's pivot from a mobile search engine to a SaaS model, which led to their market fit. He discusses the importance of nurturing investor relationships well before fundraising, the strategic timing of expanding to the U.S., and the nuances of building a team in competitive talent markets like San Francisco. Dessain also touches on the future of interactive and conversational interfaces in software, hinting at Algolia's direction and vision for the coming years.

Summary Notes

Introduction to 20 Minutes VC Podcast Episode

  • Host Harry Stebbings promotes his Snapchat and invites listener engagement.
  • Harry introduces the episode's focus on Founders Friday.
  • Algolia's recent Series B funding of $53 million is highlighted.
  • Nicolas Dessaigne, co-founder and CEO of Algolia, is introduced as the guest.
  • Harry mentions his preferred tools for calls and interviews, particularly Zoom and Viewedit.

You are listening to the 20 minutes VC with me, your host Harry Stebbings at H stepbings with two B's on Snapchat. All ads get a personal message from me.

This quote is Harry introducing himself and his Snapchat handle, emphasizing the personal connection he offers to his audience.

Just last week he raised a whopping $53 million Series B led by Excel with participation from Sasta des trainer at Intercom, Jotti Bansal at App Dynamics and Carl Valberg at Envision.

Harry is announcing Algolia's successful Series B funding round and the notable investors involved, demonstrating the company's growing influence in the SaaS market.

If you haven't heard Nicholas's prior episode with us, then you can check it out on the twentyminutevc.com.

Harry encourages listeners to engage with previous content for context and to build a relationship with the audience.

My response Zoom, the number one video and web conferencing service providing one consistent enterprise experience that allows you to an array of activities including online meetings, video, webinars, collaboration enabled conference rooms and business IM, just to name a few.

Harry shares his recommendation for Zoom, a tool he uses for professional communication, and its recent funding success as an endorsement.

Algolia's Founding Story

  • Nicolas Dessaigne explains Algolia's origins in Paris, 2012.
  • Algolia began as a mobile search engine due to a gap in the market identified on developer forums.
  • After realizing the initial market wasn't as expected, Algolia pivoted to a SaaS model, finding market fit.

So we started the company in 2012, actually back in Paris at that time. And the first product we worked on was a search engine, but a search engine designed to work locally on mobile device.

Nicolas shares the initial concept for Algolia, which was focused on mobile search solutions, indicating the company's adaptability and responsiveness to market needs.

We saw an opportunity in the market, went after it. I think we did a very good job in terms of technology, but the market was not there as we expected it to be.

Nicolas acknowledges the initial misjudgment of market demand, which led to Algolia's pivot, highlighting the importance of market fit for startups.

Algolia's Series B Funding Success

  • Nicolas Dessaigne expresses gratitude for the successful funding round.
  • The round was not as challenging as expected, with Algolia past the validation stage typically associated with Series B.
  • The size of the round was larger than usual, indicating strong investor confidence.

Thank you so much. That was a great adventure towards that.

Nicolas expresses his appreciation for the successful funding, which reflects the company's growth and the excitement surrounding its future.

Not really, to be honest, no. That went up pretty nicely. I would say that we were past that validation stage that you are looking at for most b round.

Nicolas contradicts the common belief that Series B is the hardest to raise, suggesting that Algolia's progress made the process smoother than expected.

Fundraising Insights from Algolia's Experience

  • The fundraising process for Series B was swift for Algolia, with the round closing before the funding deck was complete.
  • Nicolas stresses the importance of building relationships and trust with potential investors over time.
  • Transparency and communication about the company's progress are key to gaining investor excitement and readiness for fundraising.

In the case of the beer round, I mean, it went super fast. I mean, we actually closed around before even having finished our funding deck.

Nicolas describes the unexpectedly rapid Series B process, implying that investor confidence and the company's track record expedited the fundraising.

You create that trust by communicating about your numbers, communicate being transparent about what you are building, where you are going.

Nicolas emphasizes the role of open communication and transparency in building investor relationships, which is crucial for successful fundraising efforts.

Fundraising Philosophy

  • Nicolas believes in always being in a state of raising funds, but clarifies that it's more about building relationships than actively seeking money post-Series A.
  • Building relationships with investors can serve as a business development strategy, especially for a SaaS company, as it opens doors to potential partnerships with the investors' portfolio companies.
  • There is no downside to this approach for a SaaS company like Algolia, as it aids in business growth.

"Yeah, I think you should always be raising, but maybe I should precise what I mean there." "It was more building relationships." "It's actually a very good business development approach."

Nicolas explains that "always be raising" doesn't necessarily mean constantly seeking funds, but rather continuously cultivating investor relationships, which can be beneficial for business development.

Initiating Conversations with Investors

  • Conversations with investors are initiated subtly, leveraging inbound interest rather than direct solicitation.
  • Companies performing well attract investors looking to prove their value, which can be leveraged by founders to build relationships and gain introductions to other companies.
  • The approach is to subtly inquire about the investors' portfolio and identify potential opportunities for collaboration.

"It's much more subtle. For us it was mostly inbound interest from investors." "It's much more subtle than just being super direct."

Nicolas describes the delicate nature of engaging with investors, emphasizing the importance of subtlety and taking advantage of inbound interest to foster relationships.

Determining the Raise Figure

  • The raise figure is determined by forecasting the company's needs, particularly looking at a two-year horizon for aggressive market investment and growth.
  • Market conditions and investor valuation also influence the raise amount, with competition among investors potentially aiding in securing the desired funds.

"It's a mix of the two." "What are investors ready to pay?"

Nicolas discusses the balance between internal forecasting and market dynamics in deciding how much capital to raise.

Cash as a Limiting Factor

  • Nicolas acknowledges that while Algolia is confident in the market size and interest in its product, the company has much to learn and improve, especially its revenue engine.
  • The revenue engine encompasses operations in sales, marketing, and customer success, which need to reach a level of perfection before cash becomes the only limiting factor.
  • Algolia aspires to handle significantly more customers and perfect its business processes while maintaining its developer-centric culture.

"We definitely are very confident about the size of the market and the evolution of the market." "The next challenge for us is to get our revenue engine at the same kind of level of perfection."

Nicolas expresses confidence in the market potential for Algolia but acknowledges the need to perfect the company's revenue engine before considering cash as the sole limiting factor.

Building Repeatable Business Processes

  • Algolia focuses on establishing repeatable and scalable business processes without losing its core culture.
  • Recent hires in key positions like director of business and marketing operations and head of legal are crucial for building a robust business engine.
  • These processes and positions are still in their early stages at Algolia.

"It's mostly about process on that side." "All these positions are very key in building that engine of sales and business engine."

Nicolas highlights the importance of processes in scaling the business and the recent strategic hires aimed at strengthening Algolia's sales and business operations.

Challenges in Building an Executive Team

  • As founders, Nicolas and his co-founder are navigating new territory in leading a company of Algolia's size.
  • Learning and adapting to these new challenges is crucial, and resources like podcasts are useful for gaining insights.
  • Building a knowledgeable executive team is a key step in the company's growth.

"What you don't know." "We have never led a company at that size, at least in that position before."

Nicolas admits the challenges faced by the founders due to inexperience at managing a company of Algolia's scale, emphasizing the learning curve involved.

Timing of the Move to the US

  • Nicolas reflects on Algolia's move to the US, suggesting it was slightly too late but definitely not too early.
  • Timing of such a move is critical and requires careful consideration based on the company's stage and market dynamics.

"Probably slightly too late, but definitely not too early."

Nicolas provides a brief reflection on the timing of Algolia's expansion to the US, hinting at the strategic nature of such decisions.

Initial Expansion to the U.S. Market

  • Algolia's customer base was primarily in the U.S. from the start.
  • Participating in Y Combinator in early 2014 required Algolia to become an American company.
  • They kept their original company in Paris as a subsidiary.
  • The team moved back to Paris after Y Combinator due to personal circumstances and the importance of maintaining close communication within the team.

"So from day one, we had more customers in the US than anywhere else." This quote emphasizes the importance of the U.S. market for Algolia from the very beginning of their operations.

"And then we participated to Y Combinator. That was early 14, and because of that participation, we had to become american." This quote explains the pivotal moment when Algolia transitioned into an American company due to their involvement with Y Combinator.

Timing for Team Split

  • Identifying the right time to split the team is challenging and depends on the company's specific circumstances.
  • Algolia split the team about a year after Y Combinator, which was summer 2015.
  • The decision was influenced by the challenges faced while working across a 9-hour time difference.

"I think you see it coming in a way we were lucky with after is that because our market was mostly in the US, we were traveling a lot between my vp sales and I, and during that travels, we kind of faced all the challenges of working at 9 hours time difference." Nicolas Dessaigne reflects on the gradual realization that the split was necessary due to the operational challenges of working across time zones.

Sales and Marketing Talent in Europe vs. the U.S.

  • The talent pool for sales and marketing in the tech industry is more concentrated in San Francisco.
  • Europe has capable individuals, but fewer tech SaaS companies to foster talent.
  • Algolia's initial sales team in France had a startup mindset, which was beneficial in the early stages.

"Definitely the talent pool for sales and marketing talents. It's San Francisco especially for the is positions." Nicolas Dessaigne acknowledges the richer talent pool in San Francisco for sales and marketing positions in the tech industry.

"Our early sales were better in France than in us at the very beginning." This quote reveals that Algolia experienced more success with their initial sales team in France compared to the U.S.

Talent Concentration and Competition

  • Europe has a high concentration of tech talent compared to the competition in San Francisco.
  • Algolia has been successful in building a strong tech team in Paris, which would be more challenging in San Francisco due to intense competition.

"The concentration of good tech people is probably better in Europe compared to the competition you have here in SF." Nicolas Dessaigne contrasts the concentration of tech talent in Europe with the competitive landscape in San Francisco.

Retention Concerns on the West Coast

  • Algolia has not yet faced significant retention issues on the West Coast.
  • The concern for retention may increase as the company continues to grow.

"So far so good, I would say. Of course that's going to be a concern later on, I guess." Nicolas Dessaigne expresses cautious optimism about current retention rates but acknowledges potential future concerns.

Lessons from Moving to the U.S.

  • The move to the U.S. was a gradual process for Nicolas Dessaigne, which allowed for progressive learning.
  • European founders should keep an open mind and be prepared to challenge their assumptions about the U.S. market.

"The one thing that was very specific to my situation was the fact that my move was very progressive." This quote describes Nicolas Dessaigne's gradual transition to living in the U.S., which eased the process.

"The most important for european founders coming here, I think, is to keep your eyes open and to know that you don't know." Nicolas Dessaigne advises European founders to be open to learning and to question their preconceived notions about the U.S. market.

Misconceptions About the U.S. Market

  • There is a common misconception among European founders that everything in the U.S. is easy.
  • The reality is that while the U.S. market is different, it is not necessarily easier.

"Maybe one of the things that people have in mind when they come here is that everything is so easy. Actually, no, everything is not easy here." Nicolas Dessaigne challenges the idea that the U.S. market is easy to navigate, emphasizing that it's different but not without its challenges.

Startup Ecosystem Maturity

  • The startup ecosystem is more mature in some regions, making certain aspects of business more challenging.
  • Despite maturity, startups still face difficulties in selling their ideas and gaining access to relevant people.
  • Hiring can be more difficult in mature ecosystems compared to less mature ones.
  • Over time, startup founders may realize that established companies are not fundamentally different from their own ventures.

"The startup ecosystem is much more mature, that's for sure. But nothing easy. You still need to sell your way, still need to get access to the relevant people."

This quote emphasizes the ongoing challenges that startups face even in mature ecosystems, such as the need to sell their ideas effectively and network with the right individuals.

"Hiring is actually more difficult than in Europe, I would say."

This quote suggests that in some mature ecosystems, such as the United States, the hiring process can be more challenging than in other regions like Europe.

"And when your own company is starting to match with their current size, you realize that it was not completely a crazy dream to build your startup and to go after the market yourself."

This quote reflects the realization that achieving success comparable to established companies is possible, validating the ambition to grow a startup.

Quick Fire Round: Fundraising Process

  • Nicolas Dessaigne discusses the significance of understanding investors' objectives during fundraising.
  • Mentors can provide valuable insights that help navigate the complexities of the investment landscape.

"About how to understand the other side of the table, like the objectives of the investors, helped us navigate more in a better way."

This quote highlights the importance of comprehending investors' goals to effectively engage with them during fundraising.

Importance of Company Culture

  • Nicolas Dessaigne believes that many people underestimate the importance of culture in building a company.
  • A strong company culture can be a key factor in the success and identity of a business.

"Disbelieve the importance of culture in the way you build the company."

This quote points out a common skepticism about the impact of company culture, which Dessaigne disagrees with, implying that culture is crucial.

Long-Term Investments

  • Investing in long-term projects with distant horizons is essential for future success.
  • Algolia is focusing on developing conversational interfaces and new product features that may become market leaders in the future.

"We are planting a lot of seeds in terms of product. We developed new features that may be the key of our market tomorrow."

This quote underscores Algolia's strategic approach to product development, investing in features that may not have an immediate impact but are expected to be significant in the future.

The Future of Algolia and Interaction with Software

  • Algolia envisions a shift from keyword-based searches to interactive and conversational interfaces.
  • The company is preparing for a future where the way people interact with software will fundamentally change.

"It's going to become more and more interactive and then conversational."

This quote predicts a transformation in user interaction with technology, moving towards a more conversational approach.

Podcast Promotion and Tools

  • The host, Harry Stebbings, promotes the upcoming episode featuring Nicolas Dessaigne on Sasta.
  • Harry shares information about Zoom and Viewdit, tools that facilitate video conferencing and personalized video communications.

"And if you enjoyed the episode today with Nicholas and I, then you can head over to Sasta where you can find the episode with him on Monday, discussing the scaling to 10 million ARR and raising their 53 million in series b funding, I'd absolutely love to hear your thoughts and feedback on that."

This quote serves as a promotion for an upcoming podcast episode, encouraging listeners to tune in for more insights from Nicolas Dessaigne.

"Zoom, the number one video and web conferencing service providing one consistent enterprise experience."

This quote highlights Zoom as a recommended tool for video and web conferencing, emphasizing its reliability and enterprise features.

"Viewdit is a free video recording tool that makes it easy for organizations to embrace the power of video for personalized communications."

This quote introduces Viewdit as a valuable resource for creating personalized video content, enhancing communication within organizations.

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