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.
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.
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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.
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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.
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.
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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
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