Convercent In The News


In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

The Mistake:

Not doing enough testing and research.

Convercent is an enterprise software company. We’re 5 years old, and we’ve hit our stride. We’re growing at a very healthy rate today.

If you rewind three years, we had a belief in what the product should be and what our go-to-market strategy should be. Fortunately, our belief in the product was correct. It’s the same product we sell today very successfully.

Our go-to-market strategy, which was focused on small-to-medium business customers, was incorrect based on too little data. We should have gathered more data before we invested millions of dollars into that plan.

A little bit of backstory: We raised about $49 million from investors. Because of that support, we had the resources to be able to build the business and scale it rapidly. On the other hand, one of the challenges that comes with those resources is that when you make decisions, it’s easy to make them based on a little bit of data and go all-in.

When we started the company, we began selling to companies with fewer than 1,500 employees. We had some initial success, and we were able to sign up a group of about 20 or 30 customers. That was the equivalent of going to a car dealership, test-driving a car around the block three times on a nice sunny day, and saying: “Great, I want to spend $40,000.”

But you never drove that car in the snow. You didn’t drive it when the trunk was full. You didn’t figure out how all the buttons worked. Those are all things you find out after you spend the $40,000. In some instances, when the first snow storm comes, you realize that the all-wheel drive doesn’t work the way you need it to.

That’s very similar to what can happen in venture-backed businesses. You get a little bit of data, and you say, “That’s fantastic. Now I’m going to invest in an entire sales team and a one-year marketing strategy.”

What’s very dangerous in software in the B2B world is that there is always low-hanging fruit. These are customers that will find your solution interesting. What you need to confirm is, is that small group representative of all the buying mentality out there?

We unfortunately didn’t do enough testing and research, and we made a substantial investment that resulted in us having to make very difficult business decisions about a year later.

We went through 2013 and we did end up signing over 100 customers, but the amount of money we invested to get those customers would never have allowed us to build a company that was financially viable. When we came to the end of that journey, after about a year, I had one of the most difficult days I’ve ever had as a CEO. We had to do a round of layoffs. I remember saying to the team, “The really disappointing thing about today is that I made a bad decision that’s going to result in some people losing their jobs, but I’ll still be able to come back to work tomorrow.”

The Lesson:

We took the next car out for a very long test-drive before we bought it.

We spent a year with a core group at the company doing the selling themselves. We sold many accounts for about a year and really tried to understand how the market would work as we transitioned to the enterprise space.

Fortunately, by digging long and far enough, we were able to identify that there was a real business opportunity on the exact same product we started with five years ago.

You can follow Convercent on Twitter at @convercent.

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