Josh Manion, Ensighten CEO: Series A at $5M in Revenue

1Mby1M Research · 1Mby1M Case Study

Interviewer: Sramana Mitra

This interview is part of the case study-based research and entrepreneurship education work of 1Mby1M, the global virtual accelerator founded by Sramana Mitra.

Abstract

Josh Manion co-founded Ensighten, a tag management and digital marketing data platform, with his wife in 2009, self-financing the venture using proceeds from Stratigent, a web analytics consulting firm the couple had built to roughly $6-7 million in revenue since 2002. Ensighten addressed enterprise marketers’ inability to manage a rapidly growing stack of digital marketing vendors without constant IT involvement, offering a single line of code that let marketers control tagging and data flow directly.

The company bootstrapped for nearly three years, growing to about 40 large enterprise customers – including American Express, Capital One, and Home Depot — and roughly $5 million in revenue with 35 employees before raising a $15.5 million Series A in September 2012, followed by a $40 million Series B in 2013 that helped fuel 150% year-over-year growth.

Transcript of the Interview

Sramana Mitra: Let’s go back to the very beginning of your story. Where are you from? Where were you born, raised, and in what kind of background?

Josh Manion: I grew up in a little town in Wisconsin called Jamesville, which had about 50,000 people. My dad delivered little snack cakes to grocery stores and stocked the shelves with them. My mom ran a store. It was a Midwest upbringing. The unique element for me was that I was actually homeschooled all the way through high school. That afforded me some unique latitude to pursue some of the things that I’m passionate about. One of which is chess, which I took to some extreme. I actually played as a professional chess player for a couple of years before going to college. I have one sister three years older than me.

Sramana Mitra: Where did you choose to go to college?

Josh Manion: I ended up going to MIT.

Sramana Mitra: So did I. When were you at MIT?

Josh Manion: I graduated in 2001.

Sramana Mitra: I’m quite a bit before you. Which department were you in at MIT?

Josh Manion: I was Course 15 there. It’s Management but focusing on Information Technology. I was trying to build my own major up but it wasn’t offered. I was taking all of my electives in business and technology.

Sramana Mitra: What happens after you graduate?

Josh Manion: While I was at MIT, I actually started a company. This was during the dot-com heyday. We then got acqui-hired by a bigger company.

Sramana Mitra: Which company acqui-hired you?

Josh Manion: It was Myteam.com. Myteam.com was then bought by Active Networks.

Sramana Mitra: What was your concept?

Josh Manion: We were essentially building a virtual community for amateur athletes. The idea was to have places to post and manage your team and leagues for all the different amateur sports that you partake in. Myteam was best known for their relationship with Little League Baseball.

Sramana Mitra: You went to work for Myteam for how long?

Josh Manion: I worked pretty much through graduation and for about six months afterwards. Maybe, a year and a half. That was a phenomenal experience for me. I got to do business development, marketing, and product management. One of the most material projects was building their internal analytic system including defining the requirements, managing the engineers around the creation of their in-house analytics, and doing the analysis and interpretation of that data.

Sramana Mitra: At the end of Myteam, what does that bring us up to?

Josh Manion: That brings us up to Fall of 2001.

Sramana Mitra: What happens next?

Josh Manion: That was the time that Myteam was acquired by Active Networks. I was a little old for a college student. I had already fallen in love and gotten married. My wife and I were about to have our first daughter. We freaked out and moved back to the Midwest.

Josh Manion: Yes, she’s from the Chicago area. We settled around Chicago in the western suburbs. I took a quick job with a network technology bar. That didn’t work out very well. That was nine months of craziness. Their business wasn’t doing well in the post dot-com world.

After about nine months of that, my wife and I decided to found a company called Stratigent. Because we barely knew what we were doing, we decided that we would do analytics consulting. It’s something that I had developed some expertise in back at Myteam.com. My perception was the timing would be very good because it was all about accountability and bringing some rigor back into marketing that had maybe slipped away briefly during the dot-com days.

Sramana Mitra: What did you decide to do in terms of your own idea?

Josh Manion: The basis for the company strategy was we would effectively play the role that we couldn’t find when I was in Myteam.com and were struggling with how we will think about the data and analytical issues around what was an application running on the web. We looked extensively at that time for consultants to help us and really couldn’t find anybody who wasn’t aligned with a specific vendor or technology.

The approach that we were taking was not one of a leveraged off-the-shelf analysis, which was the rage at that time. As a result, we really had a difficult time finding anybody who could help us. That was the original premise for it. Fortunately, a lot of the folks that I had worked with at Myteam.com went to other companies post-acquisition. Those were some of our very first customers.

Sramana Mitra: When you got the company going in Chicago, who else was involved? Was it just you or were there other people?

Josh Manion: It was just my wife and I.

Sramana Mitra: Your wife is also from the technology field?

Josh Manion: Not really from the technology field, but she’s also an entrepreneur at heart. She ran business operations.

Sramana Mitra: What did you have to do to get the business going in terms of minimum viable product as it’s called now? At that time, this term didn’t exist.

Josh Manion: The initial product was really just the expertise that we professed to have, which in hindsight, we didn’t have that much.

Sramana Mitra: You said you had expertise but you really didn’t have any expertise. You were basically building it as you went along.

Josh Manion: Exactly. I’d like to think that we were getting smarter very quickly.

Sramana Mitra: You said your first clients were people whom you had worked with at Myteam who had now gone to other companies?

Josh Manion: That’s right. I would call them up and make the pitch.

Sramana Mitra: How far did that take you? What were you able to do with that model?

Josh Manion: I described that as it was enough to survive but that was about it. That got us to maybe $100,000 in revenue. It wasn’t much.

Sramana Mitra: It was you and your wife at that point?

Josh Manion: Yes. If you think about the growth of that, we struggled along in that state for couple of years where I would describe it as if you’re an entrepreneur and you started a services business, you go on this yo-yo of feast or famine. You’re either selling or delivering. If you’re delivering, you’ve got money but not time to sell. If you’re selling, you’ve got plenty of time to sell but generally no money. You’re oscillating between those two things.

It was not before 2004 when we bit the bullet and said, “We’re being too reactive about it.” As part of that, we committed a lot of the sins that services company typically do. We chased pretty much anything that a customer would pay us to do. We quickly learned that every time we took on a project that wasn’t web analytics related, it was a bad idea. In 2004, we had this epiphany that we needed to go all in on the business and grow our suite. We actually hired a couple of people who were right out of college to be analysts for us and deliver the work so that I could focus on more of the selling.

Sramana Mitra: Where did you hire these people from?

Josh Manion: We hired them from the University of Illinois.

Sramana Mitra: The business was still a consulting business though?

Josh Manion: That’s right.

Sramana Mitra: How much longer did you carry on with this consulting business model?

Josh Manion: I’ll give you the nutshell version. The consulting company went on until my wife and I sold out our interest. In 2009, I stopped working on the consulting company, which is my current company.

Sramana Mitra: How big did the consulting company become?

Josh Manion: The consulting got up to about maybe $6 million to $7 million in revenue.

Sramana Mitra: How many people?

Josh Manion: About 30.

Sramana Mitra: All this was based in the Chicago area?

Josh Manion: We had a handful of consultants who were remote in places like New York and Minneapolis. There was only one office – in the Chicago suburbs.

Sramana Mitra: Did you develop any kind of specialization as part of this experience of building the consulting business?

Josh Manion: It certainly was formative in the decision to start Ensighten and the awareness of the problem of the space. Essentially, we found that our sweet spot was working with large, highly complicated enterprises and helping them with anything from their strategy to the technical implementation.

When my wife and I had founded Ensighten, we were doing that while we had a front row view on the pain of the enterprises around having extracting value from the digital marketing platforms of the day. In 2009 and to this day, the big incumbents are Adobe, IBM, and Oracle. The experience at Stratigent was phenomenal in understanding what was missing that presented the opportunity to disrupt the entire digital marketing ecosystem.

Sramana Mitra: What was that insight?

Josh Manion: No matter what we did with those customers, the amount of value that they were able to realize was this tiny fraction of the potential value of all the different technologies that they would use. You could think of it this way. The vendors of this time told a wonderful story about the Holy Grail of marketing. Our technology will allow you to deliver the right message to the right customer at the right time. None of it actually worked or none of it was actually possible in the real world. That was because the enterprises that we worked with had no ability to take an action on their website, on their mobile app, or on the social media platform without going through this laborious process of working with their IT department to define the changes and get something out in a release. All of it was massively fragmented. The net result was that the data that was being produced were all being stored in a format that the enterprise didn’t have direct access to. It wasn’t first priority to them. They didn’t own the data. It was generally owned by the vendor that they used. That data could be not possibly be associated with each other because of the format it was stored in. You end up with this fragmented view of the customer.

In digital marketing, the company that’s marketing to you has short-term memory loss and they cannot remember who you are. When you come to their website, they treat you one way. When they serve you a display ad, they have a completely different set of facts that might be completely contradictory to how they just treated you. Every touch point that you have with that company tends to result in a completely varied experience about who you actually are.

Sramana Mitra: Are you talking primarily about customers who are catering to consumers? Are you talking about B2B as well?

Josh Manion: Generally, our sweet spot are people who are catering to consumers. We definitely have B2B customers. The way I frequently describe the dynamics of our business is that the bigger and more sophisticated you are and the larger your business is, the greater the ROI we can generate for you. If we are to optimize your experience with 10,000 customers, that’s great and that will generate a really compelling ROI for you. If you have 10 million customers, it’s going to be that much bigger.

Sramana Mitra: Talk to me a bit about how the product is architected. You talked about what other people cannot do. What is it that you do? How do you architect the product that you can do something different and better?

Josh Manion: That really started from the inception. When we looked at solving the problem, the solution that formed in my mind was that we needed to create a platform that was completely simple to implement. It needed to be as easy as saying to a customer, “Just put that one line of code on your page and our application is fully installed.” Once that was there, it would enable our customers to leverage our application to literally drag and drop any of these digital marketing vendors on to their site in a way that would be controllable by the marketer and no longer dependent on the external forces or things like waiting three months for the next release to your website.

Sramana Mitra: Give me an example. Let’s say this tag is in place on your website. What other application are they trying to tie-in to that process?

Josh Manion: Part of what was driving the opportunity for us was the fact that the marketing technology space was growing so fast. If I think way back to when we started the consulting company, most companies had one or two tags on their sites. Now the average company has probably 25 vendors that they’re using – anything from social media, live chat to personalization engine. They’ve got 15 flavors of the ad network version. They’ve got re-targeters. That complexity increases the potential value of the enterprise but it also rapidly escalates the need to be able to manage and bring governance to those as well.

The first application that we launched was designed to say, “Let’s give complete power over all this marketing applications to the marketers themselves.” Any time they want to add a new one or remove an old one, it’s now as simple as clicking a couple of buttons on the interface as opposed to creating an IT request, touching code on thousands of pages manually, and removing it in the old world. The analogy that I’ve used quite a bit to explain what this is like is if you’re a publishing site, you almost certainly use a content management system so that your writers and editors have direct access to adding and removing stories to the site without the need to talk to developers.

The marketing team is actually doing that same type of activity in massive quantities whether it’s acquiring new customers or optimizing the relationship with current customers for using this ever-growing set of technologies. But they had no platform to do that with. They would literally have to wait in line and ask for a developer to help them put the few lines of code.

Sramana Mitra: Interesting. I see what you’re doing. Did you start this company in 2012?

Josh Manion: 2009.

Sramana Mitra: At that point, you self-financed this company based on money from your consulting firm, right?

Josh Manion: That’s right. My wife and I decided that we would bootstrap it while we were building the technology. That started at the end of 2009. That mode persisted until September of 2012 when we closed our Series A.

Sramana Mitra: Were you doing all this in Chicago?

Josh Manion: For the first few months, we were. In September of 2010, we moved our family and Ensighten out to Silicon Valley.

Sramana Mitra: What happened to the consulting company?

Josh Manion: The consulting company was being run by my wife. The first person that we had hired back in 2004 has climbed the ranks. His name is Bill Bruno. He took my role in leading sales and my wife was representing our interest as the CFO. That continued in its own parallel track until 2013 when it was sold.

Sramana Mitra: But before that in 2012, you went ahead and raised money for Ensighten?

Josh Manion: That’s right.

Sramana Mitra: At the point at which you raised money for Ensighten, what milestones had you already achieved in terms of product, product/market fit, and customers? What was the status?

Josh Manion: We had about 40 customers and about 35 employees. We were probably trending to just under $5 million in revenue that year.

Sramana Mitra: So before Series A, you already had a significant amount of revenue.

Josh Manion: Yes. Because we bootstrapped for so long, it was probably more like a Series B for a lot of companies.

Sramana Mitra: No question about it. These 40 customers that you had acquired, what was the sweet spot? Was there any characteristic of those customers that was particularly striking?

Josh Manion: I think the trend was that most of them were very large. Customers at that time including companies like American Express, Capital One, Home Depot, and Sony Electronics. It was an interesting thing. If you think about the content management system for all the digital marketing technologies, the guys that adopted that first tended to be big complicated enterprises because their pain is worse than a small company.

If you’re a small company, you might not work with 50. You might work with five of those technologies. You just didn’t have the same level of pain. Eventually, you’ll benefit from it but you’ll be less likely to be the first one to act.

Sramana Mitra: On that point, who were you selling to? Were you selling to the CIO or the CMO?

Josh Manion: Generally, we were selling to the CMO’s office. There are very few cases where we actually sell to the CMO directly, but definitely someone in their organization.

Sramana Mitra: Anything else that you want to share for that period from starting the company to getting to the Series A milestone?

Josh Manion: The takeaway is you want to be very thoughtful about the timing of when you raise money. The company needs to be ready to grow and grow according to a plan.

Sramana Mitra: At a very fast pace. Venture capitals do not invest in companies for growing at 10%. That’s not their agenda.

Josh Manion: That’s right. We know that the expectations are there. It’s a good thing that we did not raise money earlier because the market wasn’t ready. If we had raised money in 2010, we would probably have a different and negative experience because I don’t think the market was ready at all for us to show that kind of massive growth. I could anticipate that venture firms wouldn’t have been so excited about the bumpy road between A and B.

Sramana Mitra: This is something that we are very much in alignment with. Our principle in the 1M/1M methodology is ‘Bootstrap first and raise money later’. The more you can do without raising money and the more carefully and more thoughtfully you can setup the foundations of your business outside of a venture clock, the better off you are in every dimension. You are essentially a great case study of exactly that philosophy.

Josh Manion: It sounds like we have a similar view on this. If I were meeting for coffee with an entrepreneur asking for advice, I would be saying, “What’s the fastest way for you to get a product to market and start learning from your customer? How can you do that yourself? What corners can you cut so that you can be the one who does that without going out and raising real money?” Angel money is maybe a little bit in the gray area depending on who it comes from. You’re never more efficient than when you’re spending your own money.

Sramana Mitra: No question about that. You raised money in 2012 and you raised a substantial amount.

Josh Manion: Yes, it was a $15.5 million round.

Sramana Mitra: What drove your thinking in terms of whom to raise that money from?

Josh Manion: It was interesting to think about it. The main criteria was the partner. We raised from a firm that’s based in Boston. We knowingly accepted the additional logistical pain that goes with that. They had been chasing us for close to a year. They had demonstrated some longevity in their willingness to stay in touch and looking us up when they’re in town.

Sramana Mitra: You had developed some relationship with these people. They were following your progress.

Josh Manion: We talked with others but the relationship element is important.

Sramana Mitra: You had $15.5 million Series A in 2012. What was the next move?

Josh Manion: Then the company tried to scale. It’s always challenging to change gears from being a bootstrapped company to a fairly well-funded one. There are certain cultural changes that take place whether you want them to or not. We went through that process. I really describe it as growing up as a company.

Prior to that, we had a Board, but it was informal. We just went into that stage of the company where you’re maturing in every aspect. You’re coming up with a real plan that you’re committed to. You’re scaling sales and engineering. 2013 was, on a whole, very successful but wasn’t without its ups and downs as we tried to figure out the right way to scale all of those different elements of the business.

Sramana Mitra: Team-wise, how much of the team did you have before this funding versus the ones you brought on after the funding?

Josh Manion: At the time of the funding, we had some of the team. Our CTO has been with us from the very early days. We added a leader in the supervision side of engineering. That was probably taking place in parallel to the funding. Our VP of Sales had been in place from a very early stage. He was actually one of our first two or three people. If I look at the current team, those are the players that we had. We were missing the CFO and then we added a President and a Chief Strategy Officer. If I look at the current team today, it was maybe half-formed.

Sramana Mitra: What about revenue scaling? How did injecting that much capital to a bootstrapped company that was already doing $5 million a year accelerate your story?

Josh Manion: The way I would describe it is, it allowed us to continue to grow. I looked at the market dynamics and thought, “This is really ready to take off but there’s no way that I can continue to take the risk personally.” That was one aspect of it. We knew what we wanted to do. We just didn’t have the fire power to do it.

The business continued to grow. We essentially doubled the business that year. At the end of 2013, we raised our Series B. We introduced a couple of new products. The most important one being the product called Activate, which solves the data problem. That was one of the original inspirations for starting the company. It gives the enterprise ownership and control over all data that’s flowing through their fingers. That brought in some additional dynamics.

When we set out to do that, we connected with Insight Venture Partners who eventually led our Series B. They were out of New York. Even though we moved the company to Silicon Valley, we seemed to raise money from elsewhere. Our Series B was $40 million. It was more of an expansion round.

Sramana Mitra: Did you take any liquidity for yourself or your wife?

Josh Manion: Everybody is fully in. For me, it’s always been a long haul play.

Sramana Mitra: Part of it is also that you had liquidity from selling the consulting business, right?

Josh Manion: That’s right. Between the A and B, we sold the consultancy. That took some of the pressure off.

Sramana Mitra: In terms of the new product and what it does to your business, I imagine that increases the average sale price and the deal size with each of your customer. You have an upsell opportunity to a much larger deal size. Is that an accurate observation?

Josh Manion: Absolutely.

Sramana Mitra: Anything else that you want to share?

Josh Manion: We raised the Series B a year ago. The business has accelerated even more. Now, it’s growing 150% a year. That’s also a function of what you just said. As the business scales and as the number of customers increase, so has the amount of upsell and the velocity of that upsell.

Sramana Mitra: You’re selling to an existing customer base a bigger product at a higher price. That’s a fantastic situation to be in terms of growth.

Josh Manion: Yes. That’s a unique set of circumstances that benefit us.

Sramana Mitra: Terrific. It’s been a real pleasure. It’s even more pleasurable because you’re from MIT. Good luck going forward.

This case illustrates how founders can use proceeds from an earlier bootstrapped business to self-fund a new venture, delaying fundraising until product-market fit and enterprise traction are proven – a sequencing central to the 1Mby1M “bootstrap first, raise money later” methodology.

Key Takeaways

• Josh Manion bootstrapped Ensighten from 2009 to 2012 using capital from Stratigent, an earlier consulting business he and his wife had grown to $6-7 million in revenue, rather than raising outside money from the start.
• By the time of its Series A in September 2012, Ensighten already had about 40 large enterprise customers, 35 employees, and nearly $5 million in revenue – a milestone Manion described as more typical of a Series B than a Series A.
• Early customers were large, complex enterprises (American Express, Capital One, Home Depot, Sony Electronics) whose pain from managing dozens of marketing technology vendors was more acute than smaller companies’, making them natural first adopters.
• Ensighten raised a $15.5 million Series A in 2012 and a $40 million Series B in 2013, after which the business doubled and then grew 150% year-over-year, with upsell of new products like Activate to its existing enterprise base becoming a major growth driver.