Want to Build a Great Company? Focus on the Fundamentals
By Lak Ananth, CEO & Managing Partner, Next47
Verkada is reinventing how to keep the physical world safe by doing the important things exceptionally well
Last month, enterprise physical security software startup and Next47 portfolio company Verkada announced an $80M Series C financing round at a value of $1.6 billion — a valuation increase of over $1 billion just nine months after their Series B. In just the last two years, Verkada has secured 2,500 customers, tripled their revenue, launched nine new models of its cloud-based cameras, and announced their new access control product line.
Every entrepreneur (and investor) we speak to these days wants to know — how did they do it? What’s Verkada’s secret sauce? As an early Verkada investor (Next47 led Verkada’s Series A and continued our partnership in their next two funding rounds), we’ve seen how their commitment to business-building fundamentals early on and every day has made a huge impact on their long-term success.
John Wooden, who’s considered one of the greatest NCAA basketball coaches of all time, used to show his players at UCLA how to correctly put on their shoes and socks. While the Verkada co-founders — Filip, Hans, Benjamin, and James — let their new hires tie their own shoes, they do make sure to get the important things right. Here are four of Verkada’s fundamental strategies that we admire and want to highlight to other founders:
1. Find opportunities to completely reshape large markets that lack innovation
Early on, the Verkada founders received pushback from skeptical investors and advisors who pointed out that established players like Ubiquiti, Meraki and Honeywell already offered connected camera products. But Verkada saw there was an opportunity to fully incorporate cloud and mobile technology into physical security, a massive market that hadn’t seen innovation for decades.
The skeptics also pointed out that there were already consumer products in the market, such as Ring and Nest. But Verkada saw that as a good thing — it lessened the need to educate customers and paved the way for them to enter the enterprise space, which is much bigger and more profitable. The Verkada founders forged ahead, knowing that if you put an A+ team in a market that badly needs innovation, amazing things can happen.
2. Develop your sales motion in parallel with your product
Entrepreneurs who are just starting out often focus all of their energy on building the MVP. While the product is certainly important, it’s equally important to develop your selling model.
The Verkada founders team put a tremendous amount of effort into understanding how they should sell while developing their product in parallel. They did deep customer research to understand their customers’ pain points and buying processes, and then built a sales motion and team to match those needs. As a result, when Verkada finished building their first product, they were able to start scaling revenue right away. There was no period of “missionary selling” or belated attempts to build a sales team after the MVP was built.
3. Align your business model to how your customers buy
Early on, many investors pushed Verkada to become a software-only SaaS company. But the Verkada founders decided to integrate hardware and software, knowing that subscriptions weren’t the way their customers wanted to buy. Their customers — including schools, hospitals, government, and businesses — were accustomed to securing budgets for one-time purchases, not recurring costs. Verkada made it easy for customers to continue their buying practices while providing a significantly better product — a fully integrated, no-hassle hardware and software solution with a delightful user experience.
Rather than giving in to investors who were more interested in recurring software revenue, Verkada maintained their customer-first approach and aligned their business model with what customers wanted. Because of our deep experience with enterprise customers and their buying habits, Next47 was 100% on board with this strategy. If Verkada had decided to sell only software or force a recurring revenue model, they would have faced resistance from customers.
As entrepreneurs, you have to do what your customers want. The products you deliver, your selling motion, your business model — it all has to be driven by customer needs.
4. Set a high bar for engineering and sales teams, and create a culture that celebrates accomplishments
The Verkada founders took a methodical hiring approach in order to build high-quality teams in sales and engineering. On the sales side, they often hire former athletes and put them in positions to beat their quotas many times over. Salespeople enjoy winning, and winning is contagious. In fact, their sales team today is one of the best opportunities for ambitious people early in their careers who want to learn, grow, make money and get promoted.
In engineering, Verkada hires from top engineering schools and very consciously creates stretch assignments for their best engineers. The beauty of being in a massive market where innovation has historically been slow is that the engineering team at Verkada has almost unlimited potential to be creative and deliver amazing product experiences. There’s no better feeling as an engineer than building something for the first time and seeing it get shipped to customers in fast cycles. Verkada engineers are working on the equivalent of the iPhone for physical security software, and they are going to be proud of it for the rest of their careers.
Global customer access for startups
On a personal note, our partnership with Verkada has been very gratifying for me — not only as an investor, but as someone who is trying to reshape venture capital. Next47 was built on the premise that the best startup founders need more than just a check and some advice. They need a hands-on investment partner who not only knows their business but can roll up their sleeves to help generate new revenue opportunities.
Our access to global customers, experience in combined hardware and software selling models, and deep knowledge in building technologies make us a great fit for Verkada. Early on, we were able to quickly validate their product and help them close initial customer deals — and today, we’re leveraging our expertise and customer network to accelerate Verkada’s European expansion.
Don’t lose sight of the long-term
Next47’s founder-friendly approach means that we’re not in the business of telling startups how to run the day-to-day. Instead, we serve as a knowledgeable partner that can open doors, knock down obstacles, and offer deep expertise.
While we’re thrilled with and proud of Verkada’s success and their latest funding round, we’re not declaring victory yet. We’re in it for the long-haul — focusing on helping Verkada manage fast growth while building a company that lasts for generations.
