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Didier Moretti
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After
last month's interview on M&As with Jeff Karan, Managing
Partner of Woodside Capital Partners, I thought you might be
interested in a sequel to the theme with a true
entrepreneurial story. So today, Didier Moretti, founder and
former CEO of Annuncio Software, will share why he started
Annuncio in late 1997; how he built it, grew it, and
weathered the storm when the bubble burst in 2000; and how
he successfully completed his company's acquisition by
PeopleSoft in 2002.
Anthony: How did the idea of
starting Annuncio come about, and what was behind the name
of the company?
Didier: It was 1997 and
marketing on the Internet was still in its infancy. It had
become apparent to me that the Internet would change
marketing in very significant ways. It offered a technology
and a vehicle to quickly identify customers’ needs and
personalize communications on products and services.
Enterprises would be able to use such a technology to
achieve dramatically better and faster results than
traditional marketing methods at a mere fraction of the
cost.
With this in mind, I started Annuncio Software to provide
medium to large enterprises with a solution that enabled
them to do three things: 1) get better results for less
marketing dollars, 2) develop more profitable customers, and
3) drive revenue and the bottom line.
As for the name, all the American-sounding names we came
up with were unavailable as domain names or trademarks. We
chose to use an Italian word, annuncio, which means
announcement, and it seemed to resonate well with what we
were about. Annuncio was meant to be a temporary name, but
our clients and employees embraced it, so we kept it!
Anthony: How did you finance
your operation?
Didier: We raised venture
capital funds from the very start. My co-founder and I
raised $3.25M in Series A from Norwest Venture Partners and
Advanced Technology Ventures before we hired anyone. We
raised several small rounds until early 2000, when we
decided to file for an IPO. We filed our S-1 registration
statement, and were getting ready for our road show when the
market for young technology companies crashed. We withdrew
our S-1, went back into the private equity market, and
closed an oversubscribed round of $38M.
Anthony: What sort of
validation did you perform prior to developing your product?
Didier: We went through a
thorough product and market validation process before we
began product development. This was essentially a sales
campaign to sell and validate our concept. We met with 30
prospects over a period of 4 months – the meetings entailed
a short presentation, a mock-up product demo, and most
importantly a structured discussion to probe the customer’s
needs, wants, and willingness to buy.
We conducted these meetings in waves and refined our
plans after each wave based on what we had learned. We
called this the hunt for bad news, and it took 30 accounts
until we stopped hearing things we had not thought about. As
a result of this process, we identified our target markets
and customers, positioning and value proposition,
go-to-market strategy, and the key product requirements for
our 1.0 release. We then designed and built the product.
This enabled us to hit the bull’s eye when we launched
the company. The product and value proposition hit the mark,
and our sales took off from the get-go. It also enabled us
to anchor the management team – none of us had worked with
each other before, and through the validation process we
rallied around a common purpose, vision, and strategy for
Annuncio.
This validation process was key to our success because
the market was moving fast, and there were a few competitors
who had started a year or so before we did. We had to hit
the mark with our 1.0 release in order to succeed.
I think that such a process is even more critical today,
given the scarcity of capital and milestone-based
financings. My advice to entrepreneurs is: sell your product
first, then design and build it!
Anthony: Tell us about your
first customer, who helped put Annuncio on the map.
Didier: At the time,
Netscape’s portal (NetCenter) dominated the Internet
landscape and was on an exponential growth curve. If you
could pick one ideal customer to gain immediate credibility
as a leader in Internet marketing, they were it.
Netscape had started newsletters and marketing campaigns
on the Internet, using internally developed tools. They were
having serious scalability issues due to the explosive
growth in their membership base, and were also restricted in
their ability to personalize content. They re-examined their
make vs. buy options and evaluated the few start-ups who
were playing in this space. We had designed our product with
a highly scalable architecture, and were able to win them as
a customer in late 1998, when the product was still under
development.
This was a bet the bank move for Annuncio, as Netscape’s
volume requirements were orders of magnitude higher than any
other prospect. Fortunately the bet paid off - we hired two
senior consultants to work with the account through
development and testing, and went into production
successfully when we released our product.
Anthony: How long was your
product development cycle?
Didier: It lasted 18 months,
which is fairly typical for enterprise software
applications. We started development in early 1998, and
released the first version of our product in July 1999.
Anthony: Was Annuncio’s
growth rate comparable to that of other competing CRM
companies?
Didier: We were one of the
fastest growing CRM (Customer Relationship Management)
companies at the time. We generated over $1.5M in revenue in
the first 6 months after we released the product, and over
$10M the following year. In terms of head count we were very
frugal by the standards of the time, until early 2000 when
we stepped up hiring very significantly in anticipation of
an IPO.
Anthony: What brought about
the PeopleSoft Acquisition?
Didier: From the day we
started Annuncio, we identified M&A as an important part of
our growth strategy. In early 2000, as we were getting ready
to file our S-1, we acquired a company, Brightinfo, to
expand our product offering. Our intent was to go public,
raise significant capital, and build a significant business
with a focus on marketing.
As 2001 unfolded and market conditions changed, it became
clear to us that the largest enterprise software vendors
were going to end up dominating the CRM space. PeopleSoft
was looking to make an acquisition in marketing automation
to round up their CRM solution. They met with all the
leading companies in the space and decided to pursue
Annuncio on the basis of our technology, customer base, and
the strength of our team.
PeopleSoft was appealing to us as a company that had been
successful with acquisitions, and we thought our customers
would react well to the transaction. We signed an agreement
in early 2002.
Anthony: What are you doing
currently?
Didier: I'm working as an
adviser to several start-ups. Areas of interest at the
moment include analytics, security and compliance,
infrastructure, and communications.
Didier Moretti’s Bio:
Didier is currently a start-up adviser and investor.
Previously he was Founder, Chairman, and CEO of Annuncio
Software, a marketing automation company acquired by
PeopleSoft. Prior to Annuncio, he was CEO of Cambio
Networks, a network management company, and Vice President
and General Manager at UB Networks, a networking company.
Didier joined UB Networks when it was privately held; the
company later went public and was acquired by Tandem
Computers.
Didier earned an M.S. degree in computer science and
electrical engineering, and an M.S. degree in business and
technology from the Massachusetts Institute of Technology.
He is also a graduate of Ecole Polytechnique, France.
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