20VC: Fundraising Is Also Business Development with Nicolas Dessaigne, Co-Founder & CEO @ Algolia

Nicolas Dessaigne is the Co-Founder and CEO @ Algolia. Algolia are a brilliant case study for the successful pivot, having started off life as an offline search engine for mobiles but really took off by helping companies deliver an intuitive search-as-you-type experience on their websites and mobile apps. They participated in Y Combinator's Winter 2014 batch and raised $18.3M in May 2015 from the likes of Accel Partners, Point Nine Capital, Storm Ventures and many more incredible investors. In Today’s Episode You Will Learn: 1.) How did Jonathan make his way into tech and come to found the likes of Friendster and Nuzzel? What were his biggest lessons from working at Netscape? 2.) How did Algolia go about crafting their company culture and how have they approached maintaining it as they have gone into hyper growth mode? 3.) What des Nicolas think are the most common challenges with regards to the building and maintenance of a company culture? What pitfalls and advice would Nicolas give to an early stage founder looking to build that culture from the offset? How can investors determine the strength and sustainability of the company culture when viewing startups? 4.) How was the fundraising process for Nicolas? How did the rounds differ from round to round? What elements surprised or challenged him? For Algolia, an incredibly hot startup, how did Nicolas go about about selecting which investors to have? 5.) Talking of the highly competitive round and the very excitable startup community, how do you respond to all of this insane hype and positivity. How do you ensure that you do not fall into the trap of drinking your own cool aid and remain grounded and humble? Items Mentioned In Today’s Episode: Nicolas' Fave Blog: SaaStr Nicolas’ Fave Book: Creativity Inc As always you can follow The Twenty Minute VC, Harry and Nicolas on Twitter here! If you would like to see a more colourful side to Harry with many a mojito session, you can follow him on Instagram here! The Twenty Minute VC is brought to you by Leesa, the Warby Parker or TOMS shoes of the mattress industry. Lees have done away with the terrible mattress showroom buying experience by creating a luxury premium foam mattress that is order completely online and ships for free to your doorstep. The 10 inch mattress comes in all sizes and is engineered with 3 unique foam layers for a universal, adaptive feel, including 2 inches of memory foam and 2 inches of a really cool latex foam called Avena, design to keep you cool. All Leesa mattresses are 100% US or UK made and for every 10 mattresses they sell, they donate one to a shelter. Go to Leesa.com/VC and enter the promo code VC75 to get $75 off!

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Welcome to the final episode of this very special SAS week on the 20 Minute VC with your host, Harry Stebbings, and you can find me on Snapchat @HStebbings, it would be fantastic to see you there. And this week of SAS was to celebrate the release and the success of the official Saster podcast, brought to you by Jason Lemkin and I, and you can find that on iTunes by searching for Saster, and we'd love to hear what you think. But now it's time to let the SAS continue today, and I'm thrilled to be joined by Nicholas Desain, founder and CEO at Algolia. Now, Algolia have to be the perfect use case that successful pivots can happen. Having started life as an offline search engine for mobile, they transitioned to helping companies deliver an intuitive search-as-you-type experience on the web and mobile, and they

• 0:44Harry Stebbings?

  were part of YC's Winter 2014 badge, and recently raised 18.3 million in May 2015, with investors including the likes of Excel Partners, 0.9 Capital, Storm Ventures, all of whom I hasten to add we have had on the show, and many other investors. And I have to say, I do hold a sweet spot for Algolia, as they power my favourite site on the web, Product Hunt, so fun fact there. But before we delve into all things SAS with Nicholas today, it is Friday and the weekend is coming, and there's no better way to relax than spending the weekend in bed. So make sure it's a Leesa bed. Leesa is like the Toms or Warby Parker of the mattress industry. They craft their mattresses to perfection, with three layers, including two inches of

• 1:27Harry Stebbings?

  memory foam and two inches of cool latex-like foam designed to keep you cool at night. That sounds good, but it gets better. You don't even have to go and pick it up. Leesa deliver to all customers in the UK, US and Canada, and all Leesa mattresses are made in the UK and the US. So join me for this weekend of Leesa heaven, and head over to leesa.com/vc, that's L-E-E-S-A dot com forward slash VC, and enter the promo code VC75 to get an incredible $75 off at checkout. However, it's now time to jump into the show today, so without further ado, I'm delighted to welcome Nicholas Desain, founder and CEO at Algolia.

• 2:13Speaker 01

  You have now arrived at your destination.

• 2:17Harry Stebbings?

  Before we start today, this is part one of a special two-parter with Nicholas. In part one, we'll be discussing the founding journey, the creation story. And then in part two, on the official Sasta podcast, we'll be discussing all things SaaS, hiring, culture, all that good stuff. So find that on Sasta on iTunes. Nicholas, awesome to have you on this very special episode of Founders Friday as a two-parter with the official Sasta podcast. Thank you so much for joining us today.

• 2:46Speaker 02

  You're welcome. Thank you for having me.

• 2:48Harry Stebbings?

  Now, I'd love to kick off today by hearing about how you came to be the founder of Algolia. Rather a general question, I know, but what's the origin story for you?

• 2:58Speaker 02

  Oh, yeah, I was always, I would say, passionate about entrepreneurship. And I had this huge, like, awesome opportunity to work with Julian, my co-founder. And that was kind of like the guy I wanted to create a company with. So it was a no-brainer for me. Algolia in itself came to being because of questions on Stack Overflow. If you don't know Stack Overflow, it's a very, very famous developers forum. And we saw many questions and answered questions about app developers wanting to embed Lucene, which is a search engine, an open source library, wanting to embed Lucene inside their own apps and struggling with that. We had the experience, the previous experience to build that, and so we just did.

• 3:44Harry Stebbings?

  Absolutely. And I'd love your advice then. I'm embarking on a new project and there's a few partners in mind. And you said you knew that Julian was the right guy for you to be your partner. So what was it about Julian that made you think he was right? Did you guys have complementary skills? Were you completely different, which made you a good pair? What was it about him that made him right?

• 4:06Speaker 02

  Yeah, that's a very good question, but actually, no. So it's not. I guess that the best, the best way to find a partner is to find someone who is complementary. I wouldn't say we were such complementary partners in our case, because we were both technical. Like the way we wanted to build the team, the important things for a company. All of that things were like the core things we agreed upon were kind of critical and also critical in our later success. In the case of Julien, I've worked with him a couple of times in my career. And so in the beginning, that's when I actually had that thought about, okay, I want to work with him, to be the company with him one day.

• 4:51Speaker 02

  Because I saw him, how he thought, how he were, how he was attacking problems and so on. And that was exactly the same approach I would want to take. Kind of like not the common advice. I'm not even saying you should follow that advice. Complementary is better, but make sure that you are aligned about like the core things you want to build.

• 5:12Harry Stebbings?

  And then speaking of kind of Julien and the early, early days of Algolia. I've read that you actually sat down with Julien, your co-founder again. And at the time of founding and discussed the culture. And the culture that you wanted to build before you actually proceeded with the building of Algolia. So was that true and what did the discussion look like at such an early stage?

• 5:33Speaker 02

  Yeah, that's what, that's actually true.

• 5:35Harry Stebbings?

  That is very forward thinking of you, Nicholas. Well done.

• 5:40Speaker 02

  No, that's, that's, that was interesting. At that time, we already knew, we were kind of agreeing about what we were going to build. But we also knew that, I mean startups being startups, chances were we would pivot and have to change our mind many, many times. For us, it was more important to make sure the culture was the right one. To be able to constantly reinvent yourself, to adapt to, to events. Well, to basically be agile and always.

• 6:12Speaker 02

  Adapt to circumstances and also we both had spent a lot of time at big corporations. In a sense, we knew what we didn't like. We had that experience and we made sure together that the kind of culture, the kind of people we wanted to hire, the kind of team we wanted to create was the same.

• 6:32Harry Stebbings?

  You said that about agile culture and so how did you look to build a culture of iteration and quick moving nature from the offset? What does that look like?

• 6:44Speaker 02

  It's not when I say that, actually, it's not at all thinking about like a development methodology. It's really more like a general concept of having a team that is empowered, that is feeling like owners of what they are doing so that they can actually take initiatives, try things. We want people who get out of their comfort zone, who are always trying to learn. That worked pretty well and that helped us along the way to pivot. We did pivot. Also, many of our nice successes came from the team, from initiatives that were taken by individuals. And having that empowerment really helped there. Let me give you like a very quick anecdote.

• 7:24Speaker 02

  I remember like maybe a year or two ago, like a year and a half ago, I was at an accelerator in Paris, Le Comping, describing the journey, answering questions. And after that event, one of the founders there came to see me and told me that, oh, you know, I thought the other guy was the founder. And he was referring to our VP of Staff, Gaëtan, who came to Le Comping like a couple of months before to describe a partnership we had with them. He was so convincing, he was so engaged into what he was saying, that the guy assumed he was the founder. And that's exactly what we look for in people we hire.

• 8:05Harry Stebbings?

  And how do you look to to scale that empowerment? As you do scale yourselves as a company and increase your hiring and grow and grow and grow, how do you increase and sustain that sense of ownership and pride in the company that you work for?

• 8:20Speaker 02

  Yeah, it's tough, it's tough. It's very difficult to scale. I mean, people joining, of course, we take care when we hire to look for people who would be compatible with that culture. We will try as much as we can, but when they join, their conception of the culture is always different, which is normal. I mean, as long as they have not lived it, it's very difficult to really understand. And it can take months, maybe six months, before to really understand it. And so quickly enough, we realized that instead of just speaking about culture, we had to formalize it. And we did that about two years ago, the first version. Then we continued to scale and we saw that it was failing again. And so we did that again, actually, a couple of months ago.

• 9:03Speaker 02

  Again, we clarified the culture, nailed some key values. For us, it's grit, trust, care, candor and humility. Then making ourselves accountable to these values, like using them to make decisions, to basically make everyday decisions.

• 9:20Harry Stebbings?

  And what do you think then? You said about kind of new hires not fully expecting the culture that it actually is. Would you say that's the most common challenge then? Kind of a misalignment of expectations? Or what is the most common pitfalls that you may have encountered or you've seen happen around you?

• 9:39Speaker 02

  Yeah, the big challenge is when you scale fast, you will onboard many people at once that didn't have time really to understand the culture. Well, there is no perfect solution, but if you just assume that as they join the company, they will learn as they go, it's not going to work. It's not going to work because there, I mean, every six months you get, it depends, like sometimes we would double the size of the company in six months. Of course, half the people being new, they cannot get all that experience with the others that would let them understand right away. So we need to, you need to formalize, you need to write it down, you need to make yourself accountable, you need to be consistent. We love all of that.

• 10:23Speaker 02

  There is no magic bullet, unfortunately. It's really repetition, repetition, repetition.

• 10:28Harry Stebbings?

  And do you think like a mentorship model is effective in these cases where you're onboarding so many and, you know, 50% within six months hired fresh?

• 10:37Speaker 02

  Yeah, yeah, that's actually we we get that that approach where we get one of the former employees being like monitoring new ones. It's one, it's new employee as he's our buddy that is helping with the onboarding.

• 10:51Harry Stebbings?

  Do you think investors can determine the strength and sustainability of a company culture when viewing prospective startups? Do you think it's something that you can walk into and feel? And if so, what what do they feel?

• 11:03Speaker 02

  I think that's difficult for them, but there are maybe a few ways to do that. I mean, the culture in the end, it's embodied by the founders. I mean, the company has the culture of the founders. As long as the founders consider the culture important. And so I guess that for investors, if they really believe in the importance of culture for scaling a company, then they need to make sure that the founders are considering that as a very important part of their activity, daily activity, like of their responsibility. And then if investors want to take the time, meeting with other team members is always good so that they can actually see for themselves how the people are embodying that the culture that the founders may have described.

• 11:49Harry Stebbings?

  And and then talking of the investors then, the investors ded into startup culture. I want to talk a little about your fundraising now, and it seems that most of the people on your cap table are also on our show, which is always nice to see. We've been going for a while now. So we've got Point9, Brilliant, Index Ventures, we've got Excel. So how was the fundraising process for you then?

• 12:12Speaker 02

  Yeah, it was different every time. So we actually did two seed rounds and then and then our size A with Excel. The first time, we had a beta, but we didn't really have any product in production yet. So at that time, it was mostly about like the potential of the technology. I think because you don't have that many companies working on like very core deep technologies like that, like search, many investors simply saw like a big potential and it was just like ready to take a small risk. It was still a seed just for the chance to be in the in the adventure. Later on, we actually joined Y Combinator after that first seed round. Kind of like the wrong order, but well, no regret.

• 12:57Speaker 02

  It was a no sum adventure. And then after Y Combinator, we got a lot, like a lot of inbound, inbound interests from investors. When we joined Y Combinator, we were already delivering the product, selling the product. And so we did quite a good traction during Y Combinator. That generated interest. At that time, however, on the side, we didn't need any money yet because we already had some money from the first seed round. And on the other end, the terms we could have gotten at that time would have not been so good. Because we were still very, very early into our growth. And so we finally decided not to raise any Series A after Y Combinator, but to take the risk to just raise a very small round

• 13:41Speaker 02

  to onboard new investors that we thought could provide a lot of value. That's when Jason Lemkin joined, joined us as an investor.

• 13:50Harry Stebbings?

  Awesome, awesome. Yeah, Jason is, is the most value add investor.

• 13:55Speaker 02

  He is.

• 13:56Harry Stebbings?

  Okay, so Jason got in at that round. I'm, I'm intrigued then to think, what are your take on this kind of rise of the second seed round? We've had a lot of founders do it, a lot say it's for, and I mean this with respect, companies that maybe haven't found product market fit. Is that a fair analysis of this?

• 14:13Speaker 02

  Yeah, for us, it was really opportunistic. It was not a necessity. We still had like so much, well, most of the first round money in the bank. So it was more like opportunistic, let's do it, we get, we can do it, let's do it, it's going to help. I think in the end for us, it was more making the choice that would be the best for the company long term. And I think we did the right one at that time. For other companies doing a second seed round, I guess you're right. It's more like getting more time to achieve kind of market fit. In the end, it's just a later on the round, like seed round or Series A or Series B. Like 10 years ago, you, what we call seed round may was, it was a Series A at that time. Did that change so much?

• 14:55Speaker 02

  Probably a lot more investors' money is also available for seed that was not available before. Like a lot of business angels investing and so on.

• 15:05Harry Stebbings?

  And then you've been through three or four rounds now?

• 15:08Speaker 02

  We did our third round last year, so that was our Series A after this couple of seed rounds. Well, I mean, the most important thing was the growth, like the metrics. We were out of like incredible 2014. On the verge at that time, we did 30% growth month over month. So it was what triggered that Series A. The product was extremely strong. Like all investors did a lot of referrals from customers. We were starting to onboard bigger and bigger customers. Many of them believed in the market, not all of them, but many of them believed in the market. And so that was like the perfect timing for us to raise our Series A that we did with Axel.

• 15:48Harry Stebbings?

  What was your favorite funding round as a founder?

• 15:51Speaker 02

  I think the last one, it was, I mean, you learn as you grow. So I think we didn't do such a great job in the first one. We didn't have any experience for doing that. And the last one, we had like a couple of fronts already down. And so we were, I think, better at fundraising, better at explaining the vision where we are going and so on. And the other things that I loved into fundraising, so it's probably specific to our company, but many of the portfolio companies of investors, of potential investors, actually potential customers for us. It was kind of like, you know, fundraising for us was also biz dev. It was also a way to reach out to new companies. And the best ever due diligence we could

• 16:35Speaker 02

  get was when an investor was asking one of their company, which was struggling with search, to test us. Because then that would become a new customer. And then, of course, if they chose us, the investor was immediately convinced.

• 16:50Harry Stebbings?

  That's fantastic. I love to think of fundraising as biz dev. But you said that you didn't do it great. So I'd love to then ask you, if you had the chance again, say, you know, Algolia exits in five years' time and everyone's well and happy, and you start a new startup, what would doing a fundraising round right look like to you now you've had this experience with Algolia?

• 17:13Speaker 02

  Oh, that's a... I never thought about that this way. I think it was mostly a lack of experience about what we could expect. Like in five years, IPO, whatever. I mean, the situation would be so different because of our experience, but also our profile. Investors love, love second timers. It's much easier for them to raise. If I look back as a first timer, could I have done something better? Maybe getting into YC before would have helped a lot. It would have enabled us to learn so much useful skills for fundraising. But honestly, I don't regret anything because I think that, given our experience at that time, given where we were, the risk, people were taking into funding us, I think that was completely okay.

• 17:58Speaker 02

  We could have done better, but not hugely better anyway. So it was an okay round. Today, with the experience, we could probably do much better, but not like 10 times better.

• 18:08Harry Stebbings?

  And you said there about the importance of YC there to your success. I'd love to hear what the kind of main takeaways from YC were that you look back and think that made YC.

• 18:21Speaker 02

  It's difficult to choose only one. There are so many good things about YC. But focusing on maybe one thing that really helped us was the pace. The pace at which we grew the company. So when you join YC, it's for a sprint. It's like a three-month sprint. We did probably the best ever decision by moving everyone of the company in the Silicon Valley at that time. So we were six people, we rented a house, and we were working like 24/7. And YC was, in a way, an excuse to work completely crazy on the company. And it was like the motivation, the inspiration that it would provide, helped us so much drive a pace.

• 19:04Speaker 02

  Every day, we were releasing new things, trying new stuff. If it didn't work, we would try something else. If it did work, we would double down. And all of that helped us to reach a great traction by end of YC, but it also set the pace for the following months and years. Kind of this sense of an acceleration program. It's really to accelerate, to go faster.

• 19:24Harry Stebbings?

  And I'd love to dive into a quick fire round now with you. Okay, so let's start with your favorite blog or newsletter.

• 19:32Speaker 02

  Oh, yeah, Saster, of course.

• 19:34Harry Stebbings?

  Of course, Saster.

• 19:35Speaker 02

  No, but, but no, it's not just to, to please Jason. No, I actually love Saster. Very useful for me because I'm not like a sales and marketing guy at, at like from my experience. And so that's exactly what Saster is doing for me. It's teaching me the important things in like in sales and marketing for SaaS businesses.

• 19:57Harry Stebbings?

  And then one product other than Algolia, of course, that you couldn't live without. What are your must use kind of softwares?

• 20:06Speaker 02

  Probably Slack, but I guess it's a, it's a common answer. I would even go to, to mention email. It's still, most of my day is still spent into email. And thinking like, thinking more about product in sense, in the sense of maybe APIs. We use Stripe. For us, it's a, it's a must use, helping us to solve like a big chunk of the problem without to have to think about it, for example.

• 20:31Harry Stebbings?

  And then, and then if you could improve one founder trait or aspect of yourself, what would you like to improve?

• 20:38Speaker 02

  I'd love to be, and I'm working on that. I'd love to be a better leader in the sense of probably charisma. That's probably something I love to improve, to, to be able to convey even better the vision of the company to, to everyone.

• 20:52Harry Stebbings?

  What, what do you think gives some leader charisma and others not? Is it a presence? Is it a way they stand? I'm intrigued. You said you're trying to, to build that and improve upon that. So what does that look like a charismatic leader to you?

• 21:05Speaker 02

  So I, I, I think it depends on every person. I mean, you don't want to fake it. You want to stay authentic. And that's my, like my challenge today is really to stay myself, to stay authentic, but then to get better at public speaking, better at like reconveying the vision where we're going and so on. And so I think it's different for everyone. If you have someone who is very good at, very charismatic, but is not believable, it's not going to work either. You need to play your strengths and my strengths are not like into the, I'm not Steve Jobs or this kind of leaders. Kind of leader could I be? And I think everyone should ask themselves the question and not try to imitate someone, but really to, to play their strengths.

• 21:49Harry Stebbings?

  And then your favorite book and why?

• 21:52Speaker 02

  Maybe Creativity Inc. I loved how culture was transformative for Pixar and the way he described that. And then, of course, many other books like Harting, about Harting's is just awesome and so on.

• 22:07Harry Stebbings?

  And then we're going to finish on the next five years for you and Algolia. What've we got in store?

• 22:13Speaker 02

  Oh, so much. No. One is, we want to change the way people search, like everywhere on the web, kind of like, you know, we don't want people willing to search for things. We want to guide them to their results with a very interactive experience, doing what Google did for the web, the public web, doing that, but for every B two B out there, like every business is out there. And then if I look more at the market perspective, search is moving from on-premise to SaaS and it's going to accelerate in the next five years. And so I believe that in five years, SaaS will be actually much stronger than on-premise. And we want to lead that market. This focus led us to decide not to provide any on-premise

• 22:58Speaker 02

  solution today, while it could help us to get much more revenue at short term. We believe that because we want to be the best player tomorrow for the SaaS market, we need to keep our focus on the product to make sure it will be the best one.

• 23:12Harry Stebbings?

  Absolutely. And Nicholas, thank you so much for joining us today. It's been amazing to hear your founding journey and I can't wait to deep dive into the world of APIs and SaaS with you in the official Saastr podcast. Which is now available to download on iTunes by searching for Saastr, that's S A A S T R, and there you'll find Nicholas's episode part two.

• 23:32Speaker 02

  Thank you, Harry.

• 23:35Harry Stebbings?

  What a fantastic part one that was with Nicholas. And as you heard, the fun does not stop there with Algolia and Nicholas. And head over to Saastr on iTunes, that's S A A S T R, on iTunes now to listen to Nicholas and for part two, where we deep dive on all things customer acquisition, customer success, retention, churn, and much, much more. That's on Saastr, S A A S T R, on iTunes. And if you're loving the show, then you can Add me on Snapchat at H Stebbings, that's Stebbings with two Bs, or sign up for the newsletter on the twentyminutevc.com so you never have to miss an episode or an update from us. But before we leave, I'd like to thank Leesa, the provider of the world's best mattresses.

• 24:17Harry Stebbings?

  And as I said earlier, with the weekend coming, why spend your time traipsing around a terrible mattress showroom when you could head over to leesa.com, that's L-E-E-S-A dot com forward slash vc, and enjoy an end-to-end online mattress buying experience, with the mattress even being delivered for free to your door to all customers in the UK, US and Canada. And not only is it easier, but the mattresses are better. They're engineered to perfection with the user front and centre as they have three layers, one of cool latex-like foam, keeping the user cool at night, and another of memory foam, so when you get to my age, you don't have as bad a back as I do. Not only that, but when Leesa sell ten mattresses, they give one to a shelter.

• 24:58Harry Stebbings?

  Incredible company and check them out at leesa.com forward slash vc, L-E-E-S-A dot com forward slash vc, and enter the promo code VC75 at checkout to get a whopping $75 discount. But now it's time for us to leave you on the Twenty Minute VC and we look very forward to seeing you on SASTA for part two.