Meet Joe Kinsella, Founder & CTO of CloudHeath
Tech In Boston #64
CloudHealth is one of the companies that has been flying under the radar in Boston. What does under the radar mean? Well — have you heard of them? And did you know that they are growing faster than HubSpot did?
“I’ll refrain from giving [the investor’s] name to keep him anonymous on this, but he was actually showing me a graph of different SaaS companies and how we tracked relative to them, and he showed me a graph of 15 quarters of HubSpot, 15 quarters of CloudHealth, and CloudHealth was outpacing HubSpot for the first 15 quarters of its existence.” — Joe Kinsella, Founder & CTO, CloudHealth
You can catch the interview with Joe wherever you listen to your podcasts. Here are some quick links to make it easy for you:
Below is the full transcript of my interview with Joe with timestamps. Enjoy.
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CloudHealth’s Joe Kinsella On Tech In Boston
Dave Gerhardt: Alright, Joe. Thanks for doing this, first of all. I want to talk about your journey and story and everything, but first, let’s talk about, since we’re sitting right here on Summer Street in your offices at CloudHealth, people that are listening that might not know who you are and what CloudHealth is and what you guys do, give us the quick background. Company size, market you’re in, funding, give us the whole story.
Joe Kinsella: Sure, yeah, sounds great. So CloudHealth is what we call cloud service management, which is a SaaS solution that both enterprises and fast-growing technology companies purchase to actually manage their cloud infrastructure. What we do is we actually take data feeds from all the point products that customers use day to day to manage their product. Everything from Amazon, Azure, Google, PagerDuty, Ansible, SaltStack, you name it, and we pull it together and integrate it into one console and we deliver three core value propositions. We deliver integrated reporting, integrated recommendations, and what we call active policy management, which we actually drive changes back to your cloud to optimize your environment. We could be optimizing security or optimizing cost or performance. I started the company, I really started the journey to start the company about four years ago. So I left my job. I was actually VP of engineering at a startup and I quit, I set myself up as an EIR at a venture firm and just started trying to figure out where there was a big business at the intersection of cloud computing and infrastructure management.
Dave Gerhardt: So I want to rewind and go back into that story, but you just gave me a tour, this place is awesome. How many people are here?
Joe Kinsella: About 120, if you can believe it.
Dave Gerhardt: That’s crazy, okay. And you were just saying three years ago, it was just a couple of you guys sitting around in a room.
Joe Kinsella (3:02): Yeah, a little over three and a half years ago, it was just me, and we took a series A round of financing in… so we signed the term sheet in February 2013, closed it end of March 2013, set up shop here on 280 Summer Street on April 1st of 2013, and I think there were four of us at the time.
Dave Gerhardt: So for the non technical crowd listening, you guys actually have some pretty legit customers, I think, if you can name a couple.
Joe Kinsella: Yeah, we do. I mean, we are, if you look, I’m hesitating here because I don’t remember which ones are public and which ones aren’t, but I’ll tell you, we have the who’s who list of both enterprises and fast growing technology companies. So if you know anyone who’s pushing the bound of the cloud, so our customers are companies that are running tens of thousands of servers in the cloud, tens of petabytes of storage in the cloud, it’s probably the best customer list that I’ve ever seen assembled in a company this size.
Dave Gerhardt: And is that, like on the technical side of things or maybe even for all roles, is that a big part of your, that has to be a big part of your hiring pitch today, right? Like hey we’re already at 120 people, right, here’s a group of our customers. That’s like you’re social proofing your own company.
Joe Kinsella: It is, yeah. I think in the early days, it was really hard to hire. It was evangelical, right? I was spending all my time actually trying to convince people that this was going to be a market. When there were investors out there in the early days that didn’t believe in this was going to be a market. It’s a lot easier now, both because of the marquee customers we’ve closed, but also just the proven success and track record. I had a, there’s a venture investor who tracks SaaS companies in our market and he actually
Dave Gerhardt: Local person?
Joe Kinsella: He is a local person, yeah.
Dave Gerhardt: Who is it?
Joe Kinsella: I’ll refrain from giving his name, keep him anonymous on this, but he was actually showing me a graph of different SaaS companies and how we tracked relative to them, and he showed me a graph of 15 quarters of HubSpot, 15 quarters of CloudHealth, and CloudHealth was outpacing HubSpot for the first 15 quarters of its existence.
Dave Gerhardt: That’s awesome. And all somebody has to do is go Google. You can find that information about HubSpot and that gives you a good sense, because HubSpot growth was insane. So that’s a good benchmark for you guys.
Joe Kinsella: It is, it’s the [CROSSTALK] marker for us.
Dave Gerhardt: So this is a question. I want to ask you this because it comes up a lot and we’re going to talk about Boston… all of that said, why isn’t everyone talking about CloudHealth? Are you just not doing a lot of PR or just kind of like…. and one of the things a lot of people say about Boston startups that comes up on this podcast is that we’re just not chest thumping and we kind of just go along… is that intentional, or does it just kind of happen that way?
Joe Kinsella: I think it happened that way, which is, when we started the business, our biggest factor that we were worried about was just getting to product market fit. And that’s where most companies die, right? And so we spent all of our time just focused on the brass tacks of just running a business and getting operating efficiency and closing customers and getting a streamline sales process and being able to acquire leads in a predictable way and in the process we just didn’t focus on branding. And it’s only actually recently, if you noticed, we’ve kind of started to surface a little bit more around Boston in terms of our presence. It’s only recently we’ve had time to kind of take a breath of air and just say okay, now we can actually start to make our name known in the Boston area.
Dave Gerhardt (6:26): Well, I can tell you after being on this podcast, there’s no looking back.
Joe Kinsella: That’s good to hear. You know it’s funny, I was out on the West Coast and I was grabbing coffee with a venture investor I know out there, and he sat down and he’s looking at our pitch deck. This was I think the B-round when we did it, and he just stopped and he just said you guys are the complete opposite of a Silicon Valley company.
Dave Gerhardt: Right? Yeah, yeah.
Joe Kinsella: He said you’re revenue numbers — we never see revenue numbers at this stage of a company, but your mindshare — no one knows who you are.
Dave Gerhardt: Out there, you have the whole… I think they’re doing well because they’re always talking about stuff, but I’m not really sure? Okay, yeah. So you mentioned product market fit, and this is another thing that comes up a lot, how did you know, what was it for you guys here that was like, we have it.
Joe Kinsella: It was so many things. I’d like to tell you it was one thing. I could tell you when we put the whipped cream and the cherry on top of the dessert…
Dave Gerhardt: But I think that’s actually a good insight, too, right? It’s many things. It’s not, for entrepreneurs and for people working at startups, it’s not just like you’re going to wake up one day and this one thing happens and then “Boom,” that’s product market fit.
Joe Kinsella: Without a doubt. We had to figure out a sales process, we had to figure out how to drive leads, we had to figure out what features customers really cared about. IT was every aspect of the business. We had to figure out how to actually support customers once we actually closed them. And so it was probably actually dozens of things just came together and there was actually a moment in time, I actually tracked, product market fit for us was February 2014. And if you actually, if I was to show you graphs of our revenue, you would see in February 2014, you se this steady slope going up, not impressive, but there’s growth every month, and in February 2014, you start to see this hockey stick occur. And that really was the moment that the last piece was actually a handful of features that had to go in the product, that customers just said, “Hey, you gotta do this.” And once we delivered those, everything kind of transformed and the sales all of a sudden our close rate went up, our ability to lead — having to lead the pipe went up, every aspect of our business suddenly took an uptick.
Dave Gerhardt: So how do you think about where the business is now? You have product market fit, revenue growth, 120 employees, like what’s the next phase, or how do you talk about the phase you guys are at now?
Joe Kinsella (8:50): It’s growth stage right now, so where we’re at right now, is as you start to add new people into the organization, you go through these step functions where you have this frenetic hiring and then you have to assimilate those people and make sure that the culture stays the same, and the maniacal focus on building a billion dollar business stays the same. So we’re kind of just in that mode of “scale everything up that we do, adopt our processes, make sure that we’re hiring the best talent in the Boston area, make sure that everyone who joins this company is here not to do a job, but to build a business, and so that’s really where we’re at today. But the mission that we’re on — the market that we’re in, the last time it was disrupted, multiple billion-dollar businesses we were built. This time that it’s being disrupted, multiple billion-dollar businesses will be built, we’d like to be one of those billion-dollar businesses in the Boston area.
Dave Gerhardt: So what do you do every day now? You’re founder, CTO — I’m sure in the beginning that meant you’re building, are you still building a lot? What does your role look like every day?
Joe Kinsella: It’s changed over the last four years. So if you’re a founder/CTO, you’re really three, four, five VPs if you’re a successful company, which is you’re a VP of Engineering, VP of Operations, VP of Production, you’re the external CEO, and I think as a founder/CTO, you just have to figure out the right time to shed some of those roles and focus on other roles. And so really what I did, the first one that I let go of is VP of Operations and VP of Engineering. We hired Adam Abrevaya, if you know who he is; he was VP of Engineering at NuoDB, came in last November and has just been a spectacular hire for us. So my focus is really the external CTO and the VP of Product. So I drive product strategy primarily today.
Dave Gerhardt: Was that hard to let go? Or was it because you found someone that’s amazing you know at that point.
Joe Kinsella: It was not, surprisingly. It was one of those things where when we decided to do it… I wasn’t sure, do I need to do this, do I not need to do this? And then once we found Adam, I just thought to myself, why didn’t we do this 10 months earlier? It just made so much sense because the risk to our business is really around product strategy and execution of that product strategy, and having that single person as the point of value just would’ve been a mistake for us.
Dave Gerhardt: Right, so the team gets better because, A, you hire a rock star VP of Engineering, but B, you’re then allowed to drop that responsibility and then go shift to the future.
Joe Kinsella: Exactly.
Dave Gerhardt: So what is product strategy mean for you?
Joe Kinsella: What it is, is we set out with a big vision of where we want to go or maybe just a small percentage through that big vision of what we’re trying to achieve, so part of it is just making sure that in any given month, any given week, and we ship software to our customers every other week, we continuously deploy into production every day, just making sure that the investments are right? And sometimes you’re making investments to satisfy existing customers, and sometimes you’re making big bets on strategic initiatives that are part of the bigger vision and it’s a delicate balancing act, and just trying to figure out when and how to make those bats is a challenging job.
Dave Gerhardt (12:09): Do you try to spend — do you have a benchmark or something maybe just personally that you try to spend with customers as a part of that?
Joe Kinsella: Yeah, I think across my team I try to make sure that we’re hitting 5–10 customer engagements per person within the team every week. And I think that’s pivotal, but one of the things I set out, I have this mantra I used since day one, which is product management is a company, it’s not a department. And even though there is a group of people with the title “Product Manager,” we actually didn’t have anyone with the title “Product Manager” until January of this year, if you can believe that.
Dave Gerhardt: That’s interesting. Was that intentional? Did you say, “We don’t need a formal product manager?”
Joe Kinsella: You know, what it was, was we have a company of product managers, which is, if you’ve ever, what it is, is we’re very product-centric company, which means everyone in the company deeply understands the product. If you were to walk down and just take any sales rep or any business development rep in our company and just said, “Show me the product,” you’ll get just a specular demo, because they know the product inside and out. And I think as part of that, it results, and you end up with a really broad set of stakeholders. So when we do reviews of requirements as an example, you’ll see 20 or 25 people get into a room and they’ll just ahs it out, because they are passionate about making sure that the product is the best possible product that they can bring to market.
Dave Gerhardt: Does that come from you being founder and, you’re technical founder, A, and B, you’re CTO founder. Is that where that tone gets set from do you think?
Joe Kinsella: I think it does, yeah. I think part of it is, as a CTO founder, you’re going to have a product-centered company.
Dave Gerhardt: It’s just that I work with David and Elias. That’s the tone. They’re both product guys and so that gets set, whereas other startups started by a salesperson and that’s the path that you guys take.
Joe Kinsella: It is. I think the one thing that I did that has continued to foster it is an openness and collaboration, which is you getting engaged of, whatever your role is in the company, you can engage in the product management process. You can get access to every single artifact that gets produced within the product team. You can have an opinion on anything across this product. And so we’ve made it so easy and frictionless for people that I think it’s kind of made that cord of the culture like that.
Dave Gerhardt: Yeah, and you want a culture of — like I’ve been at companies where you can grab anybody, you grab a random marketing person and they can’t talk their way around the product.
Joe Kinsella: Yes.
Dave Gerhardt: The whole company is better when everybody understands how things work.
Joe Kinsella: Yes. Without a doubt. And our CEO gives a hell of a demo as well.
Dave Gerhardt: Of course. He should.
Joe Kinsella: He should, yeah. So you see companies with executives who can’t actually use the product to day in and day out, and I just would never have a company that I found be like that.
Dave Gerhardt: Of course. Yeah, of course. Alright, so let’s rewind to when you’re an EIR at Northbridge. So before that you were VP of engineering at Sonian. Did you leave Sonian knowing you were going to start a company?
Joe Kinsella (15:09): I did. So I actually wanted to start this company in 2010.
Dave Gerhardt: Is it the same idea of what you guys are now?
Joe Kinsella: It’s basically the same. If you look at one of my previous companies, SilverBack Technologies, it was in the space of management and in monitoring, so this is a market I’ve spent a number of years in. We ended up acquired by Dell. I spent three long years at Dell. I tell people two of which I can explain and one I can’t.
Dave Gerhardt: Were you a number? Were you an employee with a number?
Joe Kinsella: You know what’s funny, Dell’s a high-quality company with, and I consider it one of the great American success stories, but it is a hardware integrator. It’s not a software company, and so it was a tough environment for me, but there’s a lot of talented people. They’re just not people that are in tech startups and software-oriented.
Dave Gerhardt: Was it hard to be there for three years?
Joe Kinsella: It was hard, yeah. I woke up in 2010 and I was like, what the hell am I doing? If I do this another couple years, my instincts in the startup space are going to atrophy.
Dave Gerhardt: That’s funny! That’s a good way to put it.
Joe Kinsella: So I decided I was going to leave. I went out and chatted with a number of investors in the area in 2010 about this idea of applying some of the concepts from SilverBack, but applying them to the cloud, and it was really lukewarm in 2010, and I had a charismatic CEO of Sonian who actually convinced me to come join him, and so I went off and did that. And I was probably about a year into it and just realized, now is the time to go build that business. And I think Sonian was a great experience because it was a company that really was, if you know Greg Arnette, he pioneered their usage of the cloud. Greg was pushing the cloud back in 2007, the public cloud, and building a storage solution on top of the cloud at that time, which was really forward leaning of him to have done that. And so I think that was a great experience, and it just complemented what I was doing, but finally I reached a point where I just decided, you know, there’s a big business to build at the intersection of managing infrastructure and cloud computing, and I’m going to go figure that out.
Dave Gerhardt: Yeah. How’d you get to Northbridge? Were there any connections to prior companies from investments?
Joe Kinsella: Yes. Jeff McCarthy was a board member of SilverBack, so I knew Jeff through that, and Jeff was kind enough to let me set up shop at Northbridge, so I just kind of parked there for a series of months while I was running lean experiences.
Dave Gerhardt: And what actually happens? You make the decision to be EIR at a BC firm, you show up, and then what do you do? What happens on day one? You’re sitting in an office with a blank notebook and you’re sketching out ideas?
Joe Kinsella: Yeah, so what I did was, and this is one of the struggles I had, was just putting structure. So when you’re in that early phase, you’re looking for structure.
Dave Gerhardt: And I’m sure it was hard because always having been an operator and having something to work on, all of a sudden you don’t…
Joe Kinsella (18:06): Yeah. So what I did was I capped to this idea of sprints. I committed to run a lean experiment every two weeks. One of the mistakes I’ve made in the past starting companies is just get wed to an idea and so the idea ends up consuming me and ends up making me make bad business decisions. So this time I committed myself to a market and I wanted to follow the data. So the idea was run lean experiences, have some critical assumptions I was testing out every two weeks, and then just let the data guide me to where the solution was. Because I knew there was a big business in the intersection of these two markets. So I ran lean experiments and that was my structure. So every two weeks, there was at least something I knew I had to do.
Dave Gerhardt: And you knew that, and that way, setting two weeks sets a cap on what you’re going to do.
Joe Kinsella: It does.
Dave Gerhardt: And were you actually going out and talking? What went into a lean experiment? You actually going out and talking to people I’m sure?
Joe Kinsella: It was. So one of my lean experiments was a concierge service. So I actually engaged with five companies across the Boston area. I was the service. And I wet and I visited and I sat down with VPs of Engineering, and I talked through using the cloud and I delivered a service to them. It was a free service, but in the process, I was delivering value to them, they were giving me great insight to this market and what the different opportunities were. The best lean experiment was the one that actually resulted — I date the start of the company really to a lean experiment. It’s worth telling, because it really is my founding story, which was I ran a lean experiment called the sale, and the sale was I had a really crude MVP.
Dave Gerhardt: The sale?
Joe Kinsella: I called it the sale. It was crude MVP. What I wanted to do was, I wanted to go sell it to someone that didn’t know me and I wanted to put a price tag of $50,000 on it so they would reject me. And the idea was
Dave Gerhardt: And you did this in two weeks.
Joe Kinsella: And I did this in two weeks, yeah. And the idea was when they rejected me, I would ask, okay, what is it you need to actually to buy this for $50,000? So I called up my former CEO from Sonian and he connected me with this company that fit my profile — so I had a profile fit I was looking for — and I got on the phone with the CFO, terrible sales call. The guy wanted me to give him the software.
Dave Gerhardt: I was going to ask you, as a person, throw out as an engineer, that’s got to be nerve-racking as hell to go into a stranger’s office and ask them for 50 grand.
Joe Kinsella: It is.
Dave Gerhardt: Like I’m going to get laughed out of this building.
Joe Kinsella: It is not natural for a technologist. So at the end of it, I was just like this might be the single worst sales call of my entire life, and at the end I’m trying to close, and he says, “I want you to just do a web meeting with my VP of Engineering tomorrow.” And I was like well that’s kind of odd. I was like sure, I can do that.
Dave Gerhardt: And you didn’t think the meeting went well?
Joe Kinsella: It went terrible.
Dave Gerhardt: But were you like, “Why is he having me do this call?”
Joe Kinsella (20:50): Couldn’t figure it out, but I figured you know what, I’ll do it. So I end up doing a web meeting, I suddenly find myself on a call with six people who know the problem I’m working on about as well as I know the problem. So we end up just going deep into it, I’m showing them product and division and they’re asking really hard questions and we just had this great interactive session and I realized that these people were building my solution inside their company and they were just meeting someone that also happened to be building a solution and at the end, like a typical technologist, I had such a great call, I was just trying to rush off the call and, you know…
Dave Gerhardt: Get back to building something.
Joe Kinsella: Get back to building something, and the VP of Engineering says, “Yeah, sure, we’ll buy.” And I was like… I tried to talk him out of it.
Dave Gerhardt: You were like “I don’t have anything to sell you. This isn’t real!”
Joe Kinsella: That’s exactly what I did. So I start trying to explain to him that, no, actually your CFO said you guys weren’t interested, and he’s like, “No, we’ll buy it, just send us a contract,” and I said yeah, but it’s $50,000, and he’s like our CFO’s in the room. He said we’re good. Just send us a contract. And that was the first sale.
Dave Gerhardt: That’s amazing. That’s a hell of a story, I’m glad you told that. So did you send them a contract and you basically have an agreement for them to be your first customer and now you have to go deliver this product?
Joe Kinsella: Not only did I not have a contract; I didn’t have a business entity. So I actually at that point in time had to go create a business entity. I created this terrible contract.
Dave Gerhardt: What was the name of the company?
Joe Kinsella: The original company was incorporated as CloudPercept.
Dave Gerhardt: Close!
Joe Kinsella: Close, yeah. Had Cloud, right? And so I sent them this contract that my CEO still laughs at today. It was a reseller agreement. It was all I could find, just to give them a contract and sign something, but then I reproduced that same experiment two weeks later and I closed another deal of the same size and I realized at that point in time that I was starting a business.
Dave Gerhardt: And then at what point of you having those conversations actually — when did those two businesses get your product?
Joe Kinsella: Oh they had it Day 1. As soon as they signed that agreement, I actually had them provisioned.
Dave Gerhardt: So what you had, you weren’t even; this wasn’t even fake it til you make it. What you had built in your time at Northbridge was ready to work.
Joe Kinsella: It was fully functional, yeah.
Dave Gerhardt: That’s awesome.
Joe Kinsella: It was crude, but it was fully functional. In fact my second customer, the VP of Engineering said, “Hey I have a staff meeting on Monday,” and I think he told me this on a Saturday. He said, “Can you just provision our accounts?” And I think this was a company that was running seven or eight thousand instances on Amazon and a pretty complex environment, so I provisioned it over the weekend, I found a way to make it all work, and on Monday he showed it to his management team.
Dave Gerhardt: What did you — did you know some secret that these guys didn’t know, or was it just like right time, right place, you were working on a similar solution and you ran into two companies that are going to build this internally?
Joe Kinsella (23:56): I think it was — part of it was luck. I did target companies that were pushing the cloud. So these were pioneers, they were out there, kind of where HubSpot was in using cloud infrastructure. Early pioneer pushing its usage of the cloud. And I think by targeting that I found people with great pain and they were looking for a solution, and if you look why that first sale closed, it closed because they had a pain that was so great, that they were actively trying to solve that problem themselves, and when someone came along and said, “I’ll solve that for you and you don’t have to divert resources from your business,” $50,000 for them, that was an easy choice.
Dave Gerhardt: Right, that’s an easy build or buy decision. Like why dedicate a whole engineering team not on our core product, just to do something internally?
Joe Kinsella: Go pay this guy to go build it for us.
Dave Gerhardt: So there were no competitors at the time? Was that hard?
Joe Kinsella: There really weren’t. The market really has, and even today, it’s a very fragmented market to understand what the competitive landscape looks like.
Dave Gerhardt: And it’s got to be hard because everything has cloud in it.
Joe Kinsella: Everything has cloud. So it was one of those things where, with investors, they were very confused by this market. So A round investors, when you were talking to them, they would look at it and they would see lots of companies talking about cloud and they couldn’t see the tree through the forest. They just thought everything must be competing against you. And so a lot of companies in Boston actually passed on our A round.
Dave Gerhardt: Even with those stories, you’re like, I literally went to companies that are struggling to build this internally. Did that piss you off?
Joe Kinsella: It did. Without a doubt. I had investors who I knew personally. People I had grabbed coffee with throughout the entire process of creating this company that passed. I had one investor that I would’ve loved to have on my board that said, “I think the problem’s too easy.” And I had another investor tell me that, “No actually I looked at that market two years ago. It’s not a good market, don’t build a company in that space.” So really smart, talented people who have had great successes, but when you’re looking at an A round business, it’s hard to assess what the opportunity…
Dave Gerhardt: Yeah, it’s a little bit of lick your finger and see which way the wind — it’s hard, whereas growth stage now, investors can dig into your metrics and see the market. Does that still fire you up today to build something awesome?
Joe Kinsella (26:26): It does! You know, it’s funny; I’ve been blogging throughout the whole process. You can actually see the entire journey of building this company. And I had a blog that I didn’t realize I had rescheduled that reposted recently; it was called The Chicken and The Pig. And the story was, we actually, before we raised our B round, we went out and we started chatting with some investors and both Dan and I went and we chatted with an investor we know, and he just told us, “You’re not going to get a B round.” And this was the Boston B round crunch, I don’t know if you remember that. That was a period of time where everyone said B rounds are really hard. So he just basically said you’re not going to get a B round. And it just ticked me off so much. I wrote the blog post, The Chicken and The Pig, just talking about the fact that you just need to be committed. You need to be The Pig where when it comes time for breakfast, you’re actually providing the bacon, not the eggs, right? And I just wrote the blog post and I said we’re going to go will this thing to happen, and 60 days later we had five term sheets and chose from the best of them and moved ahead.
Dave Gerhardt: That’s awesome. Did you ever, okay, so you ended up raising a Series A. In between A and B, even though things were going well, during that Series B crunch in Boston, did you ever feel like, shit, we might not be able to build this company because we’re not going to be able to raise enough capital?
Joe Kinsella: Oh without a doubt. It’s funny. It’s one of those things where at every phase, I think I’m an entrepreneurial worrier, which is at every phase, I find the thing that I worry about next. And that point in time, I was worried we could never raise a B round.
Dave Gerhardt: Which is actually, I don’t want to cut you off there, but that’s a better mantra, whereas, we can always raise money, this is always going to be able to happen. And I think what’s happened around the last year and a half, two years, here in Boston is that a lot of companies that raised money two years ago made a bunch of hires, now have to peel back because the promise was, yeah, raise this money now, hire a bunch of people, and we’re going to come back with another growth round for you later.
Joe Kinsella: Yes, and I worried greatly about it. And also, when you take that money, it’s a burden. It’s an emotional burden on an entrepreneur, because you’re making commitments to people, and every time you take a new round, the commitment gets bigger, and even though to take that round successfully, you achieved something in the past, that’s the past now. It’s a zero sum game, you have to start over. You have to achieve that next big goal.
Dave Gerhardt: Instead of having whatever your Series A was, instead of having 6–8 million dollars of somebody else’s money, now you have 50–75 million dollars of somebody else’s money, and the outcomes start to get — you know once you raise that money, the possible outcome is way different.
Joe Kinsella: It is. So anyway, every round, I’ve gone into it worry about what the economics of that round will be, should be take that round, but we’ve been smart about capital. I mean we raised $40 million in three rounds. It’s been highly efficient business, I’ll tell you that, which is the economics of our business have been very good. We’ve driven really great sales efficiency in our model. The reason we’ve been able to raise the capital, A round was leap of faith by some Boston investors who just took a chance on it. B round, I like to call it a discriminating buyer. A discriminating buyer understood our market would look at it and say I get this. And then C round was just pure fundamentals and efficiency of our model.
Dave Gerhardt: Yeah, now this thing is cranking. Oh man, that was a good — what else did we want to talk about today? You’re from New York. Now I’m sitting in your office, you have a poster of Fenway, you’re a huge advocate of the Boston startup world, and you got here by accident?
Joe Kinsella (29:58): I did, yeah. So computer science degree, state school New York. I graduated and I just happened to notice that all the jobs would either be in Boston or San Francisco and Boston seemed a lot closer than San Francisco, so I jumped in my car and I drove to Boston and I crashed at my sister’s place, she happened to be living out in the Boston area, and I looked for a job for two weeks, and after two weeks I couldn’t find a job. So I figured I should give up and go home. My sister looked at me and said, “I think you might want to give it a little bit longer than two weeks.” So I landed my first job, was actually a company called Easel Corporation, which did an IPO, ended up faltering and ended up acquired. I think the assets reside somewhere deep in the bowels of IBM today. But its claim to fame was the first Scrum Team. So my first software development team out of school was the very first Scrum Team that Jeff Sutherland went off and wrote the original Agile paper on.
Dave Gerhardt: That’s crazy. What do you think — is it funny to look back at how software development was done then with Scrum Teams? And today, you mentioned to me earlier you guys are shipping code all day.
Joe Kinsella: Yes, it is. You know what was great was I came at the crossroads of two worlds. So you still had the waterfall world, was going on for several years after that.
Dave Gerhardt: Tell people that might not know what a Scrum Team is what that is.
Joe Kinsella: Sure, a Scrum is a specific form of an agile methodology and Scrum really is just focused on putting some structure in place to allow teams to execute in an agile manner and cross-functionally in a way that just streamlines the software development process and strives to maximize the impact on the customer. It’s just an efficiency in the models. Back when I joined there were still companies that were putting out releases that went a year or a year and a half before they shipped software. And we were pushing out releases at a fairly rapid cadence, and we were basically at that crossroads. We were a small — when I started it was a three person team, and I think at its maximum, was an eight person team.
Dave Gerhardt: Give us some perspective. What was a fast cadence then?
Joe Kinsella: I think we were shipping software every couple months.
Dave Gerhardt: That’s insane.
Joe Kinsella: Just to be clear, it was shipping on disks.
Dave Gerhardt: Oh yeah, this was like physically like, people were getting mailed…
Joe Kinsella: You got it.
Dave Gerhardt: Yeah, that’s awesome. Alright, let’s wrap up and just talk about Boston for a little bit. What do you think — so the thing I like to ask a lot of people is what’s great about building a company in Boston?
Joe Kinsella (33:03): Sure, yeah, I may have landed here by accident, but I wouldn’t be building my business anywhere else. I travel all around the globe and I’m in different cities all the time and I’m passionate about Boston primarily because it’s a fantastic city. Go around the globe, visit different cities, and find a city that’s more approachable, that’s more — it’s a small city, but it has all the advantages of larger cities, and the entrepreneurial community here is just first rate. The combination of the universities we have, the research that goes on here, the strong venture community, I don’t know how you could find a better place to build a business than Boston.
Dave Gerhardt: There’s a piece of advice, I forget who said this, I think it was Rob Go from NextView. One thing he wishes Boston founders did more was travel. Just to get outside and then bring that back here. Do you agree with that?
Joe Kinsella: Yeah, I think that makes sense. Every time I go to Silicon Valley, every time I spend time in San Francisco, I come back with a different idea, different perspective and some of them you’ll find in my blog. I’ve written blogs about coffee in the Silicon Valley.
Dave Gerhardt: I’ll link to it in the notes for sure.
Joe Kinsella: But I’ll tell you, even when I do that, though, about a year ago, I was out in Salma and I was sitting in a coffee shop in the middle of San Francisco and I’d spent the entire day in San Francisco and I was just looking around thinking, I wouldn’t put my business here.
Dave Gerhardt: I here you, I was out there in February and I was standing at a stoplight. I went out in the morning, I went to the gym, I got a coffee, I’m standing at a stop light, and two people come next to me and they’re talking about Series A and this VC firm and it’s like 8:15 in the morning on a Thursday and I was like — the thing I love about Boston is that it’s a bubble in a good way, which is you don’t have to go out to dinner and everybody’s angling for a job or hiring or talking about fundraising. I think that that was my take away of being out there, is just I don’t know if I could handle that.
Joe Kinsella: Yeah, I agree. I think we go about doing our business in a more quiet manner.
Dave Gerhardt: Yeah. Alright, let’s be critical for a second. So as a founder here, what’s something that we need to be doing better?
Joe Kinsella: I think our venture community needs some replenishing.
Dave Gerhardt: Tell me more about that. This has come up a lot.
Joe Kinsella (35:35): I think venture businesses are kind of unusual businesses from the perspective of, their entrepreneurial endeavor is in themselves and the entrepreneurs, for the venture firm to live on, the entrepreneurs have to move on and pass the baton to a new set of investors and I think that’s unlike our business, right? And I think that sometimes is challenging. So I think the longevity of these venture firms, some of the best firms 10 or 15 years ago are no longer the best firms in Boston, and some of the new firms — who was it Mike Volpe who wrote an article where he made the comment that limited partners are looking for venture firms with proven track records, which makes it hard to actually start a new venture firm. I think there’s a little bit of a challenge there, where I think we want new venture firms, new ideas, but at the same time it’s actually hard to go create that. So I think we’re fine. In our case we have four investors in our company, two are Boston, two are Silicon Valley. We did it by choice, but it was the Boston investors that allowed this company to get created.
Dave Gerhardt: If I was starting a company and I came to you and I was looking for advice, what would you tell me about fundraising?
Joe Kinsella: One of the tips I always share is, don’t wait until you actually have packaged everything up to start talking to investors. So one of the things I did and I tell entrepreneurs to take the time to go make this happen, is grab coffee with investors and let them be part of your entrepreneurial process. Tell them the challenges that you’ve hit in the early phases. Tell them where you think you’ve taken a left turn. I think that openness is somewhat scary to some people, but what it does is it builds a track record. You have investors now who are watching you say, “I’m going to go do X,” and then you go do X. And they can watch it over a longer period of time instead of coming into a high-pressure environment where you’re trying to convince them all in a series of a couple weeks that you should make this investment.
Dave Gerhardt: Cool, Joe. This has been a lot of fun. I appreciate it. Alright. You’re a CTO, but I’m going to give you a shot to plug your company CloudHealth right now.
Joe Kinsella: Great, I love it. So we are the hottest company you don’t know about in the Boston area.
Dave Gerhardt: I told you, once I publish this, this is going to change.
Joe Kinsella: This is my last day of it. So yeah, we’re growing rapidly, we are a highly product-centered company. We have big hard problems that are very difficult to solve, so if engineers are looking for that, this is a great environment, and you’ve got a group of people who’ve built this company with proven track records, which is we’ve built businesses before, we’ve built big businesses before, we’ve had successful exits, and we’re just about execution and driving customer value, so it’s a great environment to work in.
Dave Gerhardt: And a good looking office that’s expanding. Cool man, what’s your Twitter handle?
Joe Kinsella: You can find me @JoeKinsella.
Dave Gerhardt: Awesome. Thanks for doing it.
Joe Kinsella: Awesome.
Dave Gerhardt: Appreciate it.
Joe Kinsella: Appreciate it, thank you.