20VC: Is Series B Really The Hardest To Raise? Should The Only Limiting Factor Post Series B Be Cash & When Is The Right Time To Move To The US with Nicolas Dessaigne, Founder & CEO @ Algolia

Nicolas Dessaigne is the Founder & CEO @ Algolia, the most reliable platform for building search into your business. Just last week they raised $53m in funding led by Accel with participation from Jason Lemkin @ SaaStr, Point Nine Capital, AppDynamic’s Jyoti Bansal, Intercom’s Des Traynor and InVision’s Clark Valberg and more incredible investors. In Today’s Episode You Will Learn: 1.) How Nicolas made his way from Paris to YC to founding one of the hottest SaaS startups of the day in Algolia? 2.) Tom Tunguz has said before that the Series B is the hardest to raise, having just raised his, does Nicolas agree with this? How did this round differ from others? How can founders know what is the right amount to raise? Is 18 months still the desired runway? 3.) Does Nicolas think he made the move to the US at the right time? Too early or too late? What advice would Nicolas give to founders making or thinking about making this move? What areas are Europe and vice versa the US better at hiring for? 4.) Which functional areas do both Europe and the US lead in their respective fields? Why does Nicolas think that it is harder to hire well in the US? Does Europe still have a fundamental lack of experienced sales and marketing professionals? 5.) How did Jason Lemkin train Nicolas to approach the fundraising process? What other than funds can founders gain from the process? How can these conversations be initiated? As always you can follow Harry, The Twenty Minute VC and Nicolas on Twitter here! Likewise, you can follow Harry on Snapchat here for mojito madness and all things 20VC. Zoom is the No 1 Video and WebConferencing Service, providing one consistent enterprise experience that allows you to engage in an array of activities including online meetings, video webinars, collaboration-enabled conference rooms and business instant messaging. Plus, it is the easiest solution to use, buy and scale with the most straightforward pricing. Do not take our word for it, Zoom’s their partnership with Sequoia in their latest 100m funding round says it all. Zoom is a must for your business. ViewedIt is a free video-recording tool that makes it easy for organizations to embrace the power of video for personalized communications. ViewedIt enables sales professionals, executive leaders and customer support teams to easily record personalized videos and add them to their email conversations. Plus, with built-in tracking powered by the Vidyard platform, video creators will know who is watching what, and which video messages resonate with viewers. They’ll receive immediate playback notifications that will eliminate the wondering of whether the recipient received or watched their content. Find out more and download ViewedIt for free at vidyard.com/viewedit.

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

• 0:00Harry Stebbings?

  You are listening to the 20 minute VC with me, your host, Harry Stebbings at H Stebbings with two Bs on Snapchat. All ads get a personal message from me. It would be fantastic to see you there and hear your thoughts and feedback. But to the show today and Founder's Friday is here and my word, what a founder we have in store for you today. Just last week, he raised a whopping $53 million Series B led by Excel with participation from Saster, Dez Trainer at Intercom, Joty Ban Sal at App Dynamics and Carl Valberg at Envision, including prior investors 0.9 Capital and Alvin. The company is widely considered one of the hottest startups in SaaS, bringing the most reliable platform for building search into your business. Guest it yet? Yes, I'm thrilled to welcome Algolia to the show today. And who better than Nicholas Desain, co-founder and CEO at Algolia to join us in the hot seat today.

• 0:43Harry Stebbings?

  If you haven't heard Nicholas's prior episode with us, then you can check it out on the20minutavec.com. We'd absolutely love to hear your thoughts. But before we head into the episode today, a lot of people ask me, Harry, you do so many calls and interviews, but what do you use? My response? Zoom, the number one video and web conferencing service, providing one consistent enterprise experience that allows you to an array of activities, including online meetings, video webinars, collaboration-enabled conference rooms and business IM, just to name a few. And it's the easiest solution to use, buy and scale, and for sure the most straightforward pricing. But hey, don't take my word for it. Their partnership with Sequoia in their latest 100 million funding round says it all. Zoom really is a must-check out for your business. I cannot emphasise that enough. And you can find them at zoom.us.

• 1:27Harry Stebbings?

  Speaking of video though, to power your company there with Zoom, you must check out Viewdit. Viewdit is a free video recording tool that makes it easy for organisations to embrace the power of video for personalised communications. Viewdit enables sales professionals, executive leaders and customer support teams to easily record personalised videos and add them to their email conversations. Plus, with built-in tracking powered by the video platform, video creators will know who is watching what and which video messages resonate with which users. They'll receive immediate playback notifications that will eliminate the wondering of whether the recipient received or watched their content. And you can find out more and download Viewdit for free at video.com/Viewdit.

• 2:07Harry Stebbings?

  But enough from me. So without further ado, I'm thrilled to hand over to Nicholas Desain, founder and CEO at Algolia.

• 2:19Speaker 01

  You have now arrived at your destination.

• 2:22Harry Stebbings?

  Nicolas, it's such a pleasure to have you on the show for a second time. We had so much fun the first, we thought we had to have you back. So thank you so much for joining me again today.

• 2:30Speaker 02

  Thank you Ari for having me.

• 2:32Harry Stebbings?

  I'd love to get started this day with a little bit about you for those that maybe were under a rock for our first episode. So how did you come to found Algolia and what was the founding story for you?

• 2:42Speaker 02

  Yeah, sure. So we started the company in 2012, actually back in Paris at that time. And the first product we worked on was a search engine, but a search engine designed to work locally on mobile devices. The story behind that is that we had seen so many unanswered questions from application developers on developer forum that was Stack Overflow that were unanswered because it was impossible at that time to implement that on mobile. We saw an opportunity in the market, went after it. I think we did a very good job in terms of technology, but the market was not there as we we expected it to be. And so we quickly pivoted to a size version and that's where we found our market fit.

• 3:23Harry Stebbings?

  And in terms of market fit, I mean, wow, you found market fit because I want to congratulate you today on the $53 million announced in in funding. So a huge achievement. So firstly, a massive congratulations for that.

• 3:35Speaker 02

  Thank you so much. And that was a great adventure towards that new run.

• 3:39Harry Stebbings?

  And you're not going to escape questions on that though, so do not worry. So Tom Tunguz at Redpoint has written before and told me before that the B round is always the hardest to raise. So I'm intrigued, was this the case for you?

• 3:51Speaker 02

  Not really, to be honest. No, that went pretty, pretty nicely. I would say that we were past that validation stage that that you're looking at for most of the B round. And that also explains maybe why it was such a big round compared to traditional ones.

• 4:08Harry Stebbings?

  How did the round differ in terms of process from the others?

• 4:11Speaker 02

  In the case of the B round, I mean, it went super fast. I mean, we actually closed the round before having even having finished our funding deck. So it indeed went much faster than anticipated. The thing is that we have been working on it for the last two Years like since we raised our Series A basically during that time you spend time building relationships, building trust with with potential investors. You create that trust by communicating about your numbers, communicating transparent about what you are building, where you are going. And investors, when they are going to see months or like every six months, every every now and then, how you are evolving as a company. So going to get excited more and more. And when it comes times to raise, they are ready to move forward with you.

• 4:53Harry Stebbings?

  I'm intrigued. You said that about kind of starting from when you raised A, you were almost starting for the B immediately. Do you think founders should always be raising then? Because I hear some founders say you should always be raising and then I hear others say no. You should sometimes have your head down and focus on the product and the mission.

• 5:09Speaker 02

  Yeah, I think you should always be raising, but maybe I should precise what I mean there. Of course, just after Series A, we didn't have our mind on raising money like we exactly. It was more building relationships. And of course, at that time, I was not spending a lot of time with investors every week. But at least in the context of a SaaS company like ours, that could work with any of these investors portfolio companies. It's actually a very good business development approach as you are working with these new like investors, building this relationship. It's also a door to any of their portfolio company and that's super good for your business anyway. So there is no downside, at least on our side, at doing that.

• 5:50Harry Stebbings?

  Can I ask, how do you initiate that conversation? What's the trigger? Do you literally say to investors? Hey, I think Algolia worked great for this portfolio company, or is it more subtle than that?

• 6:01Speaker 02

  It's much more subtle. For us, it was mostly inbound interest from investors. So it was more like being careful about like staying humble on this one. But when you have a company that's doing well, investors, they want to prove their value. And so they want to be helpful to you before you actually raising so that you will be leaning towards like leveraging, like going with them after. And it's more like leveraging these opportunities by by asking like maybe an intro to asking them about how their companies are doing. And like which one of them are like maybe struggling with search. It's much more subtle than just being super direct.

• 6:36Harry Stebbings?

  I am interested. You said also about the kind of slightly larger than than prior, definitely larger than prior round. How did the raise figure appear the right figure to you? Often we hear in the earlier stages, it's always about kind of raising eighteen to twenty four months runway. When entering the growth stages, how do the raise figures come to be?

• 6:54Speaker 02

  It's a mix of the two. I mean, it's always looking forward that what are you going to need? In all cases, I would look more at two years than eighteen months. And when you're looking at that, you are like working with the assumptions that you are going to be very aggressive on the market, on investment and growth. So that there is no bad surprise. And at the same time, on the other hand, I mean, there is the market and the valuation, the amount you raise, all of that is going to be defined also by the market. What are investors ready to pay if the market is, if you can generate some competition between investors, that's going to help you raise that amount.

• 7:29Harry Stebbings?

  Again, reverting to to Tom Tunguz, he always says that Series B should be the last milestone before proving the cash is the the business's only limiting factor. Would you say that's the case now for you with with Algolia? Would you say it's greenfield from here as long as there's the cash to generate the the kind of runway required? Or are there other concerns, be it macro markets, be it kind of competitive environment? What's your thoughts on limiting factors and cash being the only one?

• 7:57Speaker 02

  That may be a difficult question to get right. I think that we have a lot to prove yet. I mean, we don't want to limit like the the story to how much cash we can invest in the next years. We definitely are very confident about the size of the market and the evolution of the market, the interest of the market in our product. So all of that is very positive. But at the same time, we know that we still have a lot to learn. I like to say that our product is really stable and robust and stable enough to physically handle one or two times more customers. But that the next challenge for us is to get our revenue engine at the same kind of level of perfection. And by revenue engine, I mean like how we operate in sales and marketing, customer success. And once we get there, then probably cash is going to be a limiting factor.

• 8:41Harry Stebbings?

  You say, once you get there, I'm intrigued by that. What does getting there look like? Through having kind of a repeatable, scalable process, is there kind of a vision for how you imagine that to be?

• 8:52Speaker 02

  Yeah, it's mostly about process on that side without losing sight of who we are in terms of culture and like a diverse and treat company. But on the business side, it's mostly about processes. We only recently hired our director of business and marketing operations, our head of legal. All these positions are very key in building that engine of sales and of business engine. And for us, it's still early. I mean, we have done that last quarter, so it's still only a few months old.

• 9:19Harry Stebbings?

  I have to ask, what were the challenges in building out that kind of key exec team that's now so crucial for you and Algolia going forward?

• 9:27Speaker 02

  Knowing what you don't know, well, all of that is kind of new for us as founders. We have never led a company at that size, at least in that position before. And so we need to learn, we need to learn about all of that. And actually, your podcasts are like a good way to learn some of that stuff, of course.

• 9:46Harry Stebbings?

  I'll pay you later. That's very kind of you. I do want to talk about the significant expansion and the kind of exciting times ahead. But you, I do want to touch also first on kind of your move to the US, a significant time ago now. So talk to me, if we take a reflective stance, when looking back, do you think you made the move, three choices here? At the right time, too early or too late? And what's the thinking behind that choice?

• 10:12Speaker 02

  It's likely too late, but definitely not too early. No, what happened, I moved here two years ago, nearly, nearly two years ago. What happened, I mean, our story is a bit particular and interesting in a way that we were lucky in the timing. So from day one, we had more customers in the US than anywhere else. So for us, the US market has always been our key market. And then we participated to Y Combinator, that was early fourteen. And because of that participation, we had to become American. So from starting the company in Paris, we became an American company. We kept the company in Paris as a subsidiary. It was kind of like the beginning of our adventure in the US. But after Y Combinator, we finally decided to move.

• 10:56Speaker 02

  All back in Paris and the thinking at that time was that while one, we were not able to all move there, my co-founder was going to have his second baby, that was really a bad time to move and two, it was too early to split the team. We were still very early and we needed that intensive communication between us.

• 11:14Harry Stebbings?

  When is not too early to split the team? Is there an inflection point where actually the splitting makes for good sense and a perfect reasoning?

• 11:21Speaker 02

  I think you see it coming in a way, we were lucky with After is that because our market was most in the US, we were travelling a lot, between my VP Sales and I, and during the travels, we kind of faced all the challenges of working at nine hours time difference and it kind of shaped who we were like bit by bit. So it was a very progressive learning and we could definitely have split the team earlier than what we did, but not by much. I mean, we split the team about one year later, like summer fifteen when I moved here. I mean, it could have been like three or six months earlier, but not much more.

• 11:53Harry Stebbings?

  I'm intrigued though, because we often hear, with me especially being in London, that that sales and marketing teams are desperately lacking in Europe. Would you say that this is very much the case, having hailed from Europe as a starting point?

• 12:05Speaker 02

  I don't think that's the case. It's just that the talent pool is going to be very different. For a company like a tech company like ours, definitely the talent pool for sales and marketing talents, it's San Francisco, especially for the highest positions. If you are looking for VP Marketing, VP Sales, the talent pool is much better here. It doesn't mean that you don't have anyone that can do the job in Europe, it's just that we don't have that many techs as companies there and so there is not as many opportunities to create that talent. For other positions, actually, what we discovered is that our early sales were better in France than in the US at the very beginning. Today it's a bit more normalized, like we have good ones everywhere, but because the people we

• 12:46Speaker 02

  hired at first were the people that were motivated by the adventure, by the like startup adventure, they had the right mindset to join us, whereas the very first ones that we hired in the US were more crutchy salespeople and we were not yet ready for that kind of salespeople.

• 13:02Harry Stebbings?

  I'm intrigued though, if you were to segment where the European market is best and where the US is best, where would you segment the two?

• 13:09Speaker 02

  I think you can find good people everywhere. The concentration of like good tech people is probably better in Europe compared to like the competition you have here in SF. I mean, you have like crazy good people here, but the local industry is startups, so you are going to compete with so many other companies to hire them. In Paris, for example, I'm lucky to have a nice attractive brand for developers. And so we don't struggle to create our tech team. We can't create a really good team that we would never be able to do here.

• 13:39Harry Stebbings?

  I'm intrigued, you spoke about the kind of intense talent competition in, on the West Coast. Do you find retention to be kind of one of your biggest concerns, building a team and scaling a team on the West Coast?

• 13:50Speaker 02

  I would say at least not yet. I mean, we have grown quite a lot in the past two years in SF. Unfortunately, we have not lost many people to the market so far, so good, I would say. Of course, that's going to be a concern later on, I guess, but we've been lucky not to lose any key team member like that today.

• 14:09Harry Stebbings?

  What interview though would be a good interview without a question from Jason Lemkin, who asks, what have you learnt from the process of making the move? And what would allow other entrepreneurs to go big in the US?

• 14:22Speaker 02

  Like the one thing that was very specific to my situation was the fact that my move was very progressive. Started by like a couple of trips, NYC, then spending more time here and then finally moving. When I ended up moving, it was already my second home. So it was not a dramatic change in my case. And I think what helped there is that the learnings were very progressive. The most important for European founders coming here, I think, is to keep your eyes open and to know that you don't know. Like you should get rid of your assumptions, because we have many in France, in Europe, I would say about like, I don't know, how easy it is to raise money here, how everything is going so fast, how like, I don't know, about the culture of companies. So many things that are actually not that true.

• 15:03Speaker 02

  And we, it's good to keep your eyes open and know that your assumptions are probably wrong and be ready to learn.

• 15:11Harry Stebbings?

  Absolutely. Before we I'm into a quick fire there. You teed me up so nicely there. What assumptions did you have and do you think European founders and the wider ecosystem has with regards to making the move to the US?

• 15:22Speaker 02

  I don't know. Maybe one of the things that people have in mind when they come here is that everything is so easy. Actually, no, everything is not easy here. It's different. People are probably a bit more mature about the startup ecosystem is much more mature, that's for sure. But nothing easy. You still need to sort your way. Still need to get access to the relevant people. Hiring is actually more difficult than in Europe, I would say. But then you start to realise that things are not that different. You start to realise that the crazy good brand, like the logos that you were seeing on the internet from your country, when you come here, you see there are these logos on the streets. Oh, they are like working here. And a bit later, you realise that it's just another company and

• 16:06Speaker 02

  and when your own company is starting to match with their current size, you realise that it was not completely a crazy dream to be your startup and to go after the market yourself.

• 16:17Harry Stebbings?

  Okay, Nicholas, we're going to enter into a quick fire round. So my favourite of any interview. So I say a short statement and then you give me your immediate thoughts in 60 seconds or less. Are you ready for the pressure round?

• 16:28Speaker 02

  Okay, let's try it.

• 16:29Harry Stebbings?

  Okay, so let's do your biggest mentor through the process and how that relationship came about.

• 16:34Speaker 02

  The process of fundraising, you mean?

• 16:36Harry Stebbings?

  Let's do the fundraising process. Yeah, that's a good one. I was talking about Algolia, but the fundraising process, you

• 16:41Speaker 02

  Jaden Lemkin is advice about like how to understand the other side of the table, like the objectives of the investors. It helped us like navigate more like in a better way that the blood water of like all the investors ecosystem.

• 16:54Harry Stebbings?

  What do you believe that most around you disbelieve?

• 16:57Speaker 02

  The importance of culture in the way you build the company.

• 17:00Harry Stebbings?

  And then Tom Tunguz says, and you can clearly tell I love Tom Tunguz, says you must plant trees you will never see. In other words, invest in projects that have incredibly long time horizons that take a long time to come to fruition. What trees are you planting that you maybe won't see?

• 17:16Speaker 02

  Actually, the fundraising process was super interesting in the way that it also helped us think more about the Vision like the five years, like four, five years vision. And part of that vision is for us today about how interacting with software is going to evolve. We believe into the rise of conversational interfaces, for example. And all of that has a lot of immediate impact on the way we shaped our, we shape our roadmap. So we are planting a lot of seeds in terms of product. We developed new features that may be the key of our market tomorrow. And of course, all of that is still very uncertain.

• 17:51Harry Stebbings?

  And then I want to finish on a very exciting one. And the next five years for you and for Algolia.

• 17:57Speaker 02

  The way really we see things evolving is that tomorrow we are not going to search as we do today with keywords. So type enter and wait for an answer. It's going to become more and more interactive and then conversational. And so I believe that in the, in a few years, the way, it's a simple way we interact with software will completely, will completely change. We see early signs with what Amazon is doing with Echo, but also what Google is, is working on with their aid of assistance. And I believe all of that is going to create the next market for Algolia. That's where I see our future.

• 18:32Harry Stebbings?

  Nicholas, it's been a pleasure to have you on the show for the second time. As I said, I so enjoyed having you on the first time. I had to have you on again for such a special announcement. So thank you so much for joining me today.

• 18:42Speaker 02

  Thank you, Harry.

• 18:45Harry Stebbings?

  And if you enjoyed the episode today with Nicholas and I, then you can head over to Sasta where you can find the episode with him on Monday, discussing the scaling to 10 million ARR and raising their 53 million in Series B funding. I'd absolutely love to hear your thoughts and feedback on that. And if you enjoyed the show and would like to follow us on social, then you can follow Nicholas on Twitter at Desain. You can follow me on Snapchat at H Stebbings with two Bs. Or you can follow the main man Jason Lemkin on Twitter at JasonLK. It would be fantastic to see you on those respective platforms. But before we leave you today. A lot of people ask me, Harry, you do so many calls and interviews, but what do you use? My response, Zoom, the number one video and web conferencing service, providing one consistent enterprise experience

• 19:25Harry Stebbings?

  that allows you to an array of activities, including online meetings, video webinars, collaboration-enabled conference rooms and business. Business I am, just to name a few. And it's the easiest solution to use, buy and scale. And for sure, the most straightforward pricing. But hey, don't take my word for it. Their partnership with Sequoia in their latest 100 million funding round says it all. Zoom really is a must check out for your business. I cannot emphasise that enough. And you can find them at zoom.us. Speaking of video though, to power your company there with Zoom, you must check out Viewdit. Viewdit is a free video recording tool that makes it easy for organisations to embrace the power of video for personalised communications. Viewdit enables sales professionals, executive leaders and customer support teams to easily record personalised videos and add them to their email conversations.

• 20:10Harry Stebbings?

  Plus, with built in tracking powered by the Vidyard platform, video creators will know who is watching what and which video messages resonate with which users. They'll receive immediate playback notifications that will eliminate the wondering of whether the recipient received or watched their content. And you can find out more and download Viewdit for free at vidyard.com/ viewdit. As always, I so appreciate all your support and cannot wait to bring you next Monday's episode.