Why is this $41m-backed Silicon Valley start-up moving to the UK?
Meet BloomReach, the cloud marketing start-up launching in the UK this week with plans to “transform” our personal shopping experiences…
For new businesses looking for start-up inspiration, look no further than BloomReach.
Launched officially in February 2012, the Silicon Valley-based cloud marketing platform which looks to improve online shopping experiences has raised over $41m in funding and counts more than 100 leading American brands including Staples, Guess and Williams-Sonoma, among its clients.
These achievements have much to do with co-founder and CEO Raj De Datta, BloomReach being his third start-up venture. Having steered the company from an early-stage idea, to assembling a team of “Google scientists” De Datta has built a personalised discovery platform that’s raised eyebrows over the water.
Not content with focusing on the US market, De Datta this week announced BloomReach’s entry into the UK and is confident the move will enable the company to capitalise upon the opportunity presented by UK marketers “who are living on a different island” to UK consumers.
We caught up with the serial tech entrepreneur-turned-LinkedIn author (see his controversial blog on “wasting time” at Google and McKinsey) to find out more about the UK launch, how London compares to Silicon Valley, and why he left the corporate world to pursue start-up ventures…
Tell us more about BloomReach, where did the idea come from?
“We felt that, in many cases, the digital experiences that large retailers and other e-commerce business were offering to consumers were just not all relevant to what those consumers were seeking. […] So we felt a new kind of platform had to be built that would house these websites to make every page totally relevant for what you were looking for at that moment, so that you have a better experience and save time. We assembled a team of Google scientists and said ‘can you build this idea of a personalised discovery platform?’ – we’ve had tremendous success in the US doing that.
“I spoke to a lot of chief marketing officer’s (CMOs) and I really felt like they were hungry for next generation technology that would understand content and deliver a great user experience. It was all very clear; CMOs were spending hundreds of millions of pounds on marketing that was fundamentally guess work and there wasn’t a data driven response.
“Secondly, I felt like we had an innovative approach; we had an angle where I could get together with these Google scientists and build an engine as intense as Google in terms of impact and really leapfrog a lot of firms out there.
“Thirdly, I had a great team which is always important. It was a group of people that I felt were among the top 100 computer scientists in the world – there were six people when we first started, now there’s hundreds.”
You founded the company in 2009 but didn’t launch until 2012, why?
“We believe in marketing reality not fantasy. We waited; we thought let’s build great technology, let’s build our customer base, let’s provide value then we’ll talk about [going public], probably a lot later than most people would.”
You’ve announced your launch in the UK today – why the UK?
“Our story now is our entry into the UK market. Before we got here we felt we really needed to understand the market and so we commissioned research which is quite staggering; when you look at the UK consumer and when you look at the UK marketer, they seem to live on different islands in some ways.
“The consumers [surveyed] really feel like companies like Amazon own the consumer experience – 82% feel like Amazon is the best provider of the customer experience and personalisation. And when you look at the consumers, almost a third of them (31%) say that personalisation is important to them but when you look at UK marketing executives less than 2% believe it’s a priority.
“The UK is a market I’m personally familiar with because I lived here for three years and I was involved in starting a business here over 10 years ago. […] The last I looked at it the percentage of Google’s profits that come from the UK it’s something like 10%, which is quite a large number, so the market opportunity is very large.
“This pain point and the survey validates the [market opportunity] and we feel like the market data substantiates the problem. We’ve also had the good fortune that a lot of our customers have been setting up in the UK so they’ve driven us here, to some extent. Brands like Forever 21 which started in the US and has come over here, or StubHub and others – they had US businesses and now have large UK businesses and all of them are fighting against Amazon.”
How does your new tool BloomCompass, also announced today, tie into this?
“There’s three parts to our platform; firstly our organic search platform, secondly SNAP which stands for ‘search, navigate’, ‘personalise’ so that when you arrive on a website the search box, the navigation and the browser are all on point to what you’re looking for, and finally Compass – it’s really a system for digital marketers to help them identify relevant opportunities to make more money.
“Marketers can look at Compass and say, on the page related to men’s shoes, it looks like this particular pair of shoes is really trending they can then think about whether they should consider promoting that and pushing that to the top of the page – Compass gives them data on that. Usually people just go by gut feel of what they think is trending, now you’re able to open a dashboard and see the things that you should be doing to make your company deliver more money.”
Having raised $41m in funding, what has the money been used for and where are you in terms of traction and product development?
“We raised $25m of the $41m just about two years ago now, fall of 2012, and it was really aimed at building more products; we expanded our R&D spending probably by double. Our second goal was expansion; we have recently opened a New York, office and now have our geographic expansion to the UK with offices in Covent Garden -we’ve hired a great team to lead that in the UK”.
How did you attract investment?
“First of all there’s me so there’s some credibility there but I went to investors and the conversation that I had with them focused on asking them ‘do we agree that there’s a problem of making websites relevant to consumers and that’s worth billions of dollars as an opportunity?’ And they all said ‘yes, we agree’. Then I said ‘do you also agree that the only reason we will fail is if we don’t deliver on that promise, the promise if solved will deliver a lot of value, so the question is the promise’ and they said ‘yes, we agree’.
“I explained to them that to mitigate that risk I would have to hire the top five scientists in the country to solve this problem, be able to attract them to work with me, and then give them enough money to fail a whole bunch of times. At the end of that journey, with $5m in the bank, I can give them a runway to fail and we will get it right and that’s when the billions of dollars will come. That conversation worked – the investors gave us that initial $5m and then I took $1m and left $4m in the bank for a long period of time and I refused to hire more than three or four people because I felt like the seventh person could change the outcome until we proved that it would work.”
Was it easy to secure the follow-on funding?
“I wouldn’t say easy is the right word, it was a matter of course. The business was always outpacing expectations, there were a lot of people interested in investing and fortunately we had choices. Those choices were there because the business was outperforming and we ran the business very carefully that was the first thing.
“The second thing was that we always raised money when we didn’t need it – we raised the second round of funding, $11m, when we had only used $1m out of the first $5m so that there was a lot of capital available. It always takes a fair amount of work to raise capital – it’s not straightforward.”
After FirstMark, you started your own venture within Cisco and then left shortly after. You’ve described the two and half year period after you left as being the wilderness years – can you expand on this?
“Between 2007 and 2009 was interesting, obviously I had been involved with two ventures before that and around that time I was intending to start a third company. I was convinced I wanted to be an entrepreneur as I’d done it before and I knew what was in store but I did always feel like the next great idea was probably two or three months away. Two years later is several two or three months away from that initial departure! Time just adds up – sometimes it’s better not to know how far away you are otherwise you would never attempt the journey in the first place!”
Did you consider returning to the corporate world?
“For sure. I would say that I have a supportive wife who felt that it was better to be aiming for what you’re looking to try to do rather than be unhappy doing something else and so we were able to do that fortunately. But for sure there were periods where every once in a while I would get up from the entrepreneurial pursuits and just make sure that I was employable. I would get a job offer, turn it down and get back to it.
“The only other thing about those wilderness years was that I was very disciplined about not compromising. What can happen if you take a risk, is at some point you say well I’ve got a team around this, somebody’s prepared to fund me, there might be something here, I’m kind of tired about the uncertainty and the hesitation so let’s just go for it. Then you realise that other people are just investing money; other people are investing a small amount of money, but you are investing your life in an undertaking of this kind.
“If you don’t feel like it’s right then it’s actually much better to cut it off early then to pursue it and five years down the road feel like you’ve wasted five years on a pursuit that doesn’t work out. I was very disciplined about saying ‘is this going to work or not?’ In the first nine things I looked at the answer was maybe the team wasn’t right, or the market wasn’t right, financing wasn’t right or the opportunity wasn’t right. I was prepared to throw away three or four months of work and start over because I would rather not be that five years down the road.”
You have an extremely impressive education; Princeton and an MBA at Harvard Business School, do you think entrepreneurial skills can be learnt on the job or would you recommend education?
“For sure my MBA helped – I went to good schools and had terrific experiences – but it’s not the only way to learn. There are plenty of other ways to learn those skills. There’s 100 different flavours of education – absolutely everyone can learn on the job. Starting a company is really an orientation; looking at everything going on around you and thinking about how you might evaluate the decisions being made around you. If you blindly do your job and don’t ask yourself the tough questions or treat it as an educational undertaking then nothing is educational about it.”
You say entrepreneurs don’t interview, they commit – meaning you can tell somebody is not going to leave their comfort zone by the fact that they ask somebody what they think first. Can you tell us more about this theory?
“I have a lot of friends who work in large corporations who call me on a regular basis and say “Raj I’m thinking about starting a company” and they’re in their late 40s or early 30s or wherever they are in their life’s journey but they haven’t left their job. It’s kind of a logical thing to do – why would you quit your job with the risk factors there etc. But in some senses that’s a self-selection process in itself. If you’re not willing to take the risk and leave your job and commit yourself to something then you don’t really have the risk tolerance to start a business anyway. You should sort of get the message from your own questions.
“For successful, smart, educated individuals, of which there’s large numbers who have pursuits and dreams the ability to get a job is on a very different time horizon. You or I could leave what we’re doing, and interview for a number of jobs, if you have the right qualifications and the right experience, you could get a job in a matter of weeks or maybe months. This isn’t true for everybody […] but in technology and entrepreneurship that’s all possible. Yet the the time frames to go start a company is different – it took me two years. If I were interviewing for a job while trying to start a company, I’d get jobs in month one and my start-up would be nowhere near mature in that time period. I would be confronted with something well understood and something not well understood, most people in that situation would go for the job.
“What I’ve concluded is that you really have to commit, you can say I have two years of cash left in the bank, after that I’m going to go live with my parents and then for two years I’ll just give it a shot and if it doesn’t work out I’ll get a job, but you can’t be hedging.”
One British entrepreneur told us Silicon Valley is boring – how would you respond to that?
“It’s not London, I certainly would say that – it’s a different environment. Having lived in London, a city I love, and New York, a city I love, Silicon Valley is a different animal. Even in Silicon Valley we’re starting to see a shift from the suburbs outback to the city but the San Francisco area has a lot of things going for it that are unique. It has some challenges as well. Capital is abundant, there’s a large labour pool of highly qualified tech students and entrepreneurs – you don’t have to go out and recruit because people have self-selected to be in Silicon Valley to do that in the first place.
“Most importantly there is an in-built culture of high expectations, because you look at what is going on around you – Dropbox is doing incredibly well or Uber just got funded at $17bn or Marketo went public for a $1bn or whatever it might be; you see grand companies being created in incredibly short spaces of time with people that used to sit next door to you. What that creates is very high expectations for one self and one’s team. You never feel like you’re good enough and that can create a certain level of stress but some of the best athletes train with other great athletes as it pushes them and that environment exists all around you in Silicon Valley – it’s unique”.
What’s your take on London as a tech eco-system? What do you think of Tech City?
“I would say all the power in the world to any government or organisation or group of people that are promoting entrepreneurship wherever that may be. If someone were to say would you bet London would become the next Silicon Valley, I would say no. On the other hand, I think it’s great – relative to the time I lived here 15 years ago, I’ve seen a number of individuals start off in accelerator programmes in America and then come to London. I think it’s all terrific, if one smart person chooses not to work in the City of London, in the financial sector and takes a job in technology – the human race is better off.”
You’ve famously said that those in their 20s shouldn’t waste their time at companies like Google or McKinsey, why do you think this? Having worked at Cisco and Lazard, would you do things differently if you could go back in time?
“I would have done things differently, I would have gone to Silicon Valley straight away and started a business – I would start a business at the age of 25. You should be thinking what it is that you’re looking to get out of your career in your 20s: at the top of that list should be learning who you are and who you want to be. If you spend your 20s not knowing that then you’ll have to spend your 30s trying to figure that out or even your 40s. It’s about that learning process of learning who you are and what you’re about and what you’re good at.
“I believe that working in a start-up for one year is equivalent to seven years in a large corporation. So if I had that choice, I would go and work for a small company and challenge myself. I would know that if I go there, I would be given more responsibilities and would test myself. I might conclude at the end of that journey that I actually like the stability of a large company so I don’t have any reservations for anyone who does that. The person I don’t think one should be is the person who goes and works at Google for five or seven years and talks about wanting to be in tech entrepreneurship and never does it, or goes and works at McKinsey or an investment bank for several years, and them comes out in their mid-30s unclear of who they really are. By the time you’re 33 or 34, if like me I’m 39 I have two kids in school, there’s no way my risk tolerance can be the same today as it was when I was 23. But in your 20s you have absolutely nothing to lose – if you have nothing to lose and everything to gain then at least go and work in some entrepreneurial venture.”
How do you see the enterprise space evolving?
“I think we have a lot of opportunity ahead of us in every sector – there are trends now that have not been as profound as the heyday of the industrial revolution all hitting at the same time. You have wearable devices, big data which is changing everything, you have cloud which is changing everything, you have wearable computing, virtual reality. You have billions of new consumers coming on to the internet across the world, you’re no longer talking about a base of 50 million or 100 million people, you’re talking about seven billion people. It’s a time when historians will look back and say it was the greatest time of change, relative to every period before it for 100 years.
“With that there will be booms and busts, macro and micro, and there will be periods where something looks like a trend and then it dies – all the usual cycles.”
As a business focused on improving online shopping experiences – what is your vision for the future of retail and e-commerce?
“If we were really out there, what we would say is that a digital experience should know who you are and what you want before you know who you are and what you want. You engage with that experience and the moment you show up there they should say this is Joe Bloggs, his preferences are this, this is what he’s seeking today, here’s some things that are on point to what he’s currently seeking and here’s some things that might inspire him.
“The first thing is that the store really knows you, who you are and it’s the best concierge in the world who really understands your likes and dislikes – the second thing is that there is no online and offline anymore – those things blur, they won’t be discreet, independent entities, they will be entwined. Thirdly we will live in a world with all these brands and retailers, where the consumers will have the perfect information so if I am running a large department store or a large grocery chain, and really I’m selling the same products as everybody else, my brand won’t be strong enough to carry me through. You will have to have something else to make your business unique.”
What businesses are you excited by at the moment?
“A number of them – the ones that I’m involved with are around e-commerce and marketing. I’m involved with [messaging tool Kahuna] and there’s another one I’m involved with called Symphony Commerce and it tries to democratise and process online selling to help small brands who may not have the R&D budget or marketing spend to be able to do it themselves. It [enables them] to get on the platform and use that experience and contend with much larger brands who may have bigger marketing budgets.”
With BloomReach doing so well, can we expect an exit in the near future? Would you go and start another venture?
“I’ve had a lot of interest in social ventures in the past and started them in the past but right now I’m pretty consumed with BloomReach. There aren’t enough hours in the day to start a business alongside it.
“As far as exits go, and this is probably another of my philosophical views, you build businesses to accomplish the product vision and you make a lot of revenue for people along the way. You don’t build a business to make a lot of revenue – those are two different philosophies. There may be money in wearable computing or there may be great money in fracking but you weave and bob to achieve your goals and you make money for your shareholders along the way – making money shouldn’t be your sole focus”.
Finally what more can we expect from BloomReach – what’s in the pipeline?
“We’ve been very focused on commerce but there’s a lot of other digital experiences out there; healthcare, ticketing businesses like StubHub, so extending the business outside of pure commerce will be an area of interest.
“We’re continuing to add language support so we don’t just support the English language. Expanding the footprint to other markets is also of interest.”