Editorial: How to grow a start-up in Silicon Valley

Sarah Putt attends the NetSuite conference in San Jose

A total of US $100 million was spent before NetSuite – the cloud-based financial and ERP solution – was floated on the New York Stock Exchange. The company began in 1998 and is backed by Oracle founder Larry Ellison. NetSuite CEO Zach Nelson says that to get scale, the company had to spend money:

“I remember having a conversation with Larry, we doubled the sales force, we burned a ton of cash. We doubled the sales force again and burned a ton of cash. I said to Larry ‘I’m going to stop doubling the sales force, I want the revenue to catch up’. He said ‘no, it’s my cash, burn it’.”

Nelson was speaking to a group of New Zealand and Australian media and analysts during the company’s annual SuiteWorld conference. I assume all of them, like me, had their travel and accommodation to California paid for by the company. The US media was filled with news about all the houses Ellison is buying and selling, so he can afford to, in a round-about way, host a few journalists.

At his keynote speech at the start of the conference Nelson told 5000 delegates that the company had 700 partners, 2000 employees, generated a US$19.1 million profit in the last financial year, and has $190 million in the bank. NetSuite has about a four percent market share of the ERP market, and it behaves a bit like Oracle’s feisty offspring - for example Nelson trash-talked Oracle’s arch rival SAP continually throughout his keynote speech.

Nelson also showcased a solution for Williams-Sonoma – a billion-dollar retail brand in the US – that NetSuite has rolled out in Australia for four stores. Williams-Sonoma is an Oracle customer in the US.

The conference took place in San Jose in a vast, nondescript building bordered by hotels that are part of international chains such as Hilton and Marriott. The kind of place, I suppose, SkyCity plans on building in the middle of downtown Auckland.

The keynote speeches were choreographed. On the second day, founder and CTO Evan Goldberg’s keynote was preceded by a short film in which he starred as Batman, and he appeared on stage wearing a cape. In one ‘demo’ he performed in a skit set in a winery and the punch line was Nelson arriving as a delivery man. This prompted lots of good natured discussion in the media/analyst room afterwards, but I caught the eye of another New Zealander in the room and we agreed that back home that kind of on-stage carry-on wouldn’t survive the ‘cringe-factor’.

A week after I returned from the US, I spoke to Catherine Robinson who runs the Kiwi Landing Pad, a communal office set up by tech entrepreneurs to help start-ups trying to break into the market. Robinson has walked the talk – one of her previous ventures was the web-performance company Aptimize that was sold to Riverbed for reportedly around US$20 million.

Her marketing strategy was to attend conferences like SuiteWorld and get in front of the influencers. It worked – one day the San Francisco Chronicle called. It was going to run an article about web performance featuring Google, and Gartner – would Aptimize like to participate? After the article was published, the phone rang and rang.

Robinson says New Zealanders think they know the US – we grew up watching US television and dreaming of visiting Disneyland – but we don’t. She says tech entrepreneurs who want to grow fast and exit well, have to adapt to the US culture, and that probably means laughing along with skits at keynote speeches, and not finding it strange that a company has $190 million stashed in the bank, when it ‘only’ made a profit of $19.1 million the year before.

In San Francisco, the heart of the US tech sector, there are apparently 8000 start-ups. New Zealand companies who try their luck will find that it’s competitive, it’s a hard place to live and it’s tough to get traction.

But what an adventure.

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