- Database startup Couchbase, an upstart rival to giants like Oracle and Microsoft, closed a $105 million spherical of enterprise funding, it stated on Wednesday.
- CEO Matt Cain described a wild couple of months to land this funding in the course of a pandemic, crammed with 20-hour days on the cellphone and twice-a-day, hour-long train exercises to alleviate stress.
- Cain is a first-time CEO, so not solely was this his first time on the enterprise capital pitch circuit, it was all executed whereas in lockdown, throughout an financial crises with enterprise circumstances altering each day.
- He tells Enterprise Insider how he satisfied traders to open their wallets.
- The key got here right down to this: honesty with traders in regards to the firm’s short-term, mid-term, and long-term prospects — backed up by prospects keen to talk privately to the traders.
- Go to Enterprise Insider’s homepage for extra tales.
Database startup Couchbase closed on a $105 million spherical of enterprise funding in a spherical led by GPI Capital, it stated on Wednesday. Getting that deal executed took a wild three months of lengthy days and continuous hustle, CEO Matt Cain tells Enterprise Insider.
“Not like companies who not too long ago introduced funding, we didn’t have a time period sheet earlier than the pandemic,” Cain stated.
This deal marks a number of milestones for Couchbase: It is the primary exterior funding the startup has obtained since 2016, which additionally means that it is the first time that Cain himself — who joined in 2017 as a first-time CEO — closed this type of deal. Up to now the corporate has raised about $234 million from enterprise capital, plus one other $50 million in debt, in line with PitchBook’s estimates.
Whereas Cain would not touch upon Couchbase’s new valuation, he did inform Enterprise Insider it was “an up spherical,” that means traders purchased in at a better value per share than in any of its earlier funding rounds.
Which means this funding can also be a comeback story of types.
When Couchbase raised that funding in 2016, it was a dramatic down spherical; shares offered at almost half the value of its earlier spherical, in line with Pitchbook’s estimates. With that spherical, Couchbase had offered about 70% of its fairness to traders for $129 million and traders valued the corporate at a comparatively meager $300 million, PitchBook says. Even much less promising, that funding got here throughout a time of document VC spending, when many startups have been reaching $1 billion-plus valuations, or so-called unicorn standing.
The next 12 months, Couchbase modified CEOs. Cain was introduced in, and shortly set about beefing up the corporate’s enterprise gross sales efforts. Couchbase charged in to tackle giants Oracle and Microsoft, in addition to MongoDB, the $12 billion firm that’s its most direct competitor in its area of interest of noSQL databases.
The standard database, pioneered by Oracle, is powered by a programming language referred to as “structured question language,” or SQL (generally pronounced “sequel”). These databases need the data they retailer to be neat and arranged.
The cloud computing period gave rise to the noSQL database, which might deal with messy, unorganized sorts of information – pictures, movies, social media posts — that do not match properly right into a SQL database. However noSQL databases have now matured to the purpose the place they will do a lot of what a extra conventional database can do and are more and more used for issues like monitoring monetary transactions or buyer information.
Couchbase, like MongoDB and different open source-based software program corporations, presents a free model of its database. However Cain’s plan during the last three years was to make Couchbase extra interesting to bigger, deep-pocketed enterprises.
And his efforts had been paying off, the corporate says, with 2019 marking a document 12 months.
It grew to 500 enterprise prospects, together with names like GE, Comcast, Wells Fargo, United and Marriott. Clients have been signing larger contracts and it had almost $100 million in annual recurring income underneath contract, it says.
The pandemic affect
When 2019 ended, Cain was prepared to buy traders. However life had different plans.
“We went from high-fiving and celebrating at our gross sales kickoff the primary week in February, to actually a pandemic three weeks later,” Cain remembers.
Cain despatched his total workforce residence in mid-March, the place they continue to be at the moment. The corporate went distant in a single day, he stated.
“We did it earlier than any mandate in any cities globally,” he says proudly. It labored out fairly nicely, and at the moment he can say that his workforce dealt with the change with “zero dip in productiveness in any respect.” However again in March, when all of it first started, he had no thought how this may affect enterprise.
In actual fact, all of the enterprise projections he deliberate to share with traders have been out the window. Some industries have been devastated like airways, hospitality, oil. However IT budgets in 2020 are being slashed throughout the board as corporations handle their money circulate by way of the financial turmoil, market researchers like Gartner say.
All the software program trade is, for the primary time, underneath strain to cut back and renegotiate their subscription contracts. Income that software program corporations thought was locked in for years, is now being reduce.
Getting much less cash, or probably no cash in any respect, from huge prospects shouldn’t be good underneath any circumstances, however particularly so when making an attempt to woo traders.
Cain spent between 15 and 20 hours a day on the cellphone together with his workforce, he says, creating each attainable monetary mannequin based mostly on ever-changing circumstances.
“You might be pondering of down situations…working each attainable variation…at charges up to now under what may even been inside the creativeness per week earlier,” he stated. “You do have this second of, how did the world change so quick?”
On a private degree, he turned to train to manage. As a self-described health fanatic, he determined that one exercise per day was not sufficient.
“I am a two-a-day man now. I do not know when that is going to vary. It has been good for calorie loss,” he laughed.
It turned out that each one these numerous enterprise projections turned the important thing to elevating cash throughout a pandemic.
He needed to be brutally trustworthy with traders — a nerve-wracking idea, underneath regular circumstances.
Relatively than pitching them simply the rosiest of all attainable futures, he confirmed traders the not-so-great short-term projections to set their expectations, but in addition the moderately excessive probability of a bounce again earlier than too lengthy, plus many causes to be assured a few wholesome long-term outlook.
Nonetheless, it wasn’t his projections on a pitch deck that secured the deal.
Traders could not go to the workplaces as a part of their due diligence, and so they by no means met with Cain and workforce in particular person. So that they doubled up on speaking to prospects to validate his numbers.
That was one other scary second for him, as he could not probably know what the purchasers would say about their very own IT budgets and what that may indicate for his or her enterprise with Couchbase.
“We’ve over 500 enterprise prospects and as you’ll be able to think about, we’ve got some which are challenged by this setting and others which are thriving,” he stated.
It labored out nicely, although: The purchasers stated precisely what Couchbase had projected that they’d. For a first-time CEO, that validation felt good.
The ultimate factor Cain did to persuade traders to open their wallets and make a great provide, was to point out a path to future progress.
Cain instructed traders that the bull case for the corporate is that, whereas its prospects are hurting now, Couchbase’s expertise is essential to their survival, the inspiration for their very own business-critical purposes. Even when they can not pay as a lot at the moment, they’re going to doubtless find yourself ramping up their spending after issues stabilize.
In spite of everything, even earlier than the pandemic, corporations have been searching for options to dear database merchandise from likes of Oracle and Microsoft — which, by the way, is why Amazon Internet Providers has had a lot success with its personal line of database merchandise.
The pattern of extra reasonably priced databases will virtually actually speed up due to the financial crises, Cain believes, which is able to solely drive extra corporations to Couchbase. “Individuals are shifting workloads off legacy options from Oracle and Microsoft,” he stated.
One other alternative comes from a brand new shift in technique. Couchbase is without doubt one of the solely in style database distributors that hasn’t but launched its personal cloud service. Proper now, its prospects run its database on clouds from distributors like Amazon, Google, Microsoft, or on their very own information facilities, however they should handle it themselves.
That may change this summer season, when Couchbase lastly launches its personal cloud service, serving to take a few of the burden of sustaining database companies away from its prospects.
That gained over new investor GPI Capital, who led the spherical. Cain says that it was an “oversubscribed spherical,” that means traders needed extra shares than the corporate was providing. Current traders additionally bought-in together with Accel, Sorenson Capital, North Bridge Enterprise Companions, Glynn Capital, Adams Road Companions, and Mayfield.
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