The end of VC?

For anyone who doesn’t play close attention to developments in the SaaS (software as a service) space, the story of San Francisco startup Kieden might sound like a replay of one of those “spin straw into gold” tales from the height of the dot-com bubble. But Salesforce.com’s Aug. 21 announcement that it acquired six month-old Kieden and its technology for tracking Google AdWord campaigns was no act of drunken optimism. Kieden’s success, like that of Salesforce, is evidence of a new and powerful wave that’s just starting to break in the IT sector, as SaaS vendors create an environment in which countless smaller companies can quickly and effortlessly be born, grow, and thrive. Kieden founder Kraig Swensrud, now senior director of product marketing at Salesforce.com, spoke with InfoWorld Senior Editor Paul F. Roberts about SaaS, Web 2.0, agile development and how the rules are changing for startups of all stripes. 

InfoWorld: You were self-funded and didn’t take in any venture capital. Had Salesforce.com not come along as it did, would that have continued indefinitely?

Kraig Swensrud: I believe it is possible for a small company to get up and running and reach a level of revenue generation where venture capital is not necessarily needed. The benefit to startup companies like Kieden these days is that there are so many services on the Web that can be subscribed to for a monthly fee as opposed to shelling out up-front cash to acquire a bunch of systems to run a small business. We attempted to use as many Internet-based services as possible. We ended up doing our hosting and e-mail through Yahoo small business. We ran our CRM system on Salesforce.com and used a service from Jotspot.com for document sharing and collaboration.

Now nobody knew that. If you went to Kieden.com or if I sent you an e-mail, you wouldn’t know it was coming from Yahoo’s servers — but it was, and at a total cost of $14.95 a month. We only have few people in the company, so Salesforce was a couple hundred dollars a month, which was amazingly cheap compared to the alternative. Through Jotspot we had this amazing collaborative space on the Internet where we could share files and documents and communicate and that could be accessed from any computer or BlackBerry anywhere in the world.

IW: Were you surprised with the speed with which you got noticed and consumed by Salesforce?

KS: No, I was not surprised by the speed with which we got noticed. I’m certain that was simply [a result of] the idea we had. Within Salesforce, when you make the claim that you can mash up Salesforce’s business processes with Google’s advertising system, which is the same system that is generating 99.9 percent of the company’s revenue, it’s not surprising that everyone stands up and takes notice.

We were surprised by the speed with which we got picked up by Salesforce.com. We didn’t start this business to be acquired. We firmly believed when we started the company that if we could situate ourselves between these two gigantic companies that were growing at alarming rates, that could produce a sizeable business for us.

IW: Your story sounds like it could have come out of late 1990s. Is there a difference between this generation of companies and the earlier generation of dot-coms?

KS: The big difference between this go around and the last go around — and certainly what we focused on at Kieden — is delivering real value to customers. The fact that we situated ourselves between Salesforce and Google was interesting but, as you mentioned, we didn’t use that to go get $20 million in venture capital. We used it to provide a product that delivers real benefit to real customers … as opposed to just exploiting the hype.