Appirio Now Backed by Sequoia Capital

Chris Barbin has released another blog post, explaining that Appirio is now backed by Sequoia Capital.

Looking at the SC website, I found more than a few of my favorite companies listed there:

SEED ($100k – $1M)

• All are also listed in higher categories

EARLY ($1M – 10M)

• CastIron Systems
• Gracenote
• Plaxo

GROWTH ($10M – $50M)

• eHarmony (love that Dr Neil Clark Warren)

PUBLIC (The success stories)

• 3Com
• Apple
• Cisco Systems
• Documentum
• E-Loan
• Electronic Arts
• Google
• Oracle
• PayPal
• SourceForge
• Symantec
• Yahoo!
• YouTube

Pretty neat, huh? This is a serious company with some seriously good research, apparently. So their backing of Appirio means that Appirio is in some really good company. (Note: Appirio is not currently on the list, which is consistent with Chris’ statement that the announcement will be official on Monday. Perhaps we shall see how much money Appirio landed.)

Appirio’s website lists Jim Goetz of Sequoia Capital on its Board of Directors and writes that “Appirio is privately held, with funding from Sequoia Capital, salesforce.com, and a select group of angel investors.” May we assume that Jim is the Team Lead for the Appirio project? Jim also works with Jive Software, Rhapsody Systems (purchased by Brocade, a former Model Metrics client), Palo Alto Systems, Widgetbox, and more.

So what does this mean for Appirio? Well, Chris lists a few areas:

• More Partners
• More Products
• More Talent

Let’s look at each in turn:

More Partners

I am constantly asking myself if my opinions about companies and business practices are influenced by my time at Model Metrics, and then I have to ask the follow-up: Is this something good to have learned or bad? Do I think that companies should emulate Model Metrics or not? Adam Caplan would frequently be heard on his phone in the middle of the office (I did learn that it’s really good when the President is in the thick of things instead of being off in a closed room) telling potential clients that all we did was Salesforce because we focused on one thing and did it well. That said, when Evan Smith and brought up the idea of partnering with Google, he dismissed it because it wasn’t Salesforce… and we all know that Appirio has gone much farther than Model Metrics has in the products realm, especially given Appirio’s fruitful partnership with Google. (On a side note, has anyone seen anything develop from Model Metrics’ Accelerate4Pharma presentation at Dreamforce 2007? Not one customer.)

What can we learn from this Google partnership? Diversifying can be a good thing. As long as Appirio can keep up with all its partner technologies (and given the people I’ve met there, I have NO doubts that it has the brainpower to do so) then it is in a position to bring some heavy hitter partners to its future implementations. For example, CastIron, another company in the Sequoia group, has great products with super capabilities.

More Products

This is pretty much a given. Appirio was founded as a product company (as voiced in the video “From Garage to Glory” from Dreamforce 2007). More money means more developers, which means more products. Some might remark that Appirio is building exclusively on Force.com (and they’d be correct–even if Appirio is building on Force.com AND Google, that still means that every product involves, to some extent, the Force.com platform) and that the lack of diversification is dangerous. In this case, I think that diversifying would be a dangerous thing. Salesforce.com is a growing company that is showing no signs of slowing down. With every product update, they are adding more features and more tools to help developers create their own features. It is this strategy that Appirio is betting on more than anything–and for the record, I would definitely go to Vegas on those odds.

More Talent

Some of my partners and readers (and now everyone else, apparently), know that I would give anything to work for Appirio. Their company culture fits in well with my mentality, and the people I have met who work there now have impressed me. There is a caveat, though:
Appirio is a product company. They are a company of developers. Yes, they have done some amazing things with standalone clients such as Dolby, but the system they built for them was not a CRM/business modeling application; it was a tool, crafted from the ground up for one purpose. It did not enable Dolby’s sales teams to sell more units, nor did it track revenue. I’m not saying that Appirio had nothing to do with that side of things; all I’m saying is that the demonstrations we have seen from Appirio have not shown off their talent in the practice optimization arena.
So as Appirio hires more talent, they will have to expand their offerings and improve their ‘pure consultant’ and Force.com Native Builder offerings. Again, nobody is saying that Appirio’s current staff can’t handle those things–they have done so with companies like Qualcomm and Borland) but the laws of specialization of labor dictate that at some point Appirio will have to add Consultants to its staff of Developers. (They call their developers Technical Consultants, but it’s just semantics at some point.) And nobody’s saying that they’re not planning to do this; Chris and Narinder are two of the sharpest knives in the drawer, and there is no way that I would ever think that I could come up with an idea before they would.

I learned some other lessons from Adam Caplan at Model Metrics: When Theikos merged with Astadia, he reminded us that Astadia was backed by so much VC that its people couldn’t really innovate because everything had to be run by the VC people. (When I left MM, Adam was actively seeking out VC money, but I’ll let my readers draw their own conclusions on that one.) Last month, I met a company president who wanted to build his application on the Force.com platform, but whose VC backer was willing to pay $200k for a .Net application versus just $8k. Everyone else in the room knew that spending $90k on a Force.com platform app would provide some amazing opportunities for revenue down the road, but he would not budge. I thought of Adam’s words and smiled.

(Lest anyone start thinking that I am starting a habit of picking on Astadia, let me say that I have NEVER said anything negative about them. Adam’s statement was likely uninformed, as I don’t think he knew who the VC was, and did not know anything about the particulars of the relationship. The VC I met for the application development project was pretty stuck in his ways, though, so we do know that there are some “my money, my way, regardless of whether it’s the right way or not” people out there. Perhaps that means that the clients should go find other money? I don’t know; it’s a rough situation. I guess that it’s important to keep perspective and know that you will make at least some money, though probably not as much as you might, with your current backer.)

Will Sequoia tie Appirio’s hands together, only releasing them when Appirio acts in full accordance with the Team Lead’s wishes, or will Sequoia trust Appirio and keep them on a loose leash, allowing Narinder and Chris to make the brilliant decisions that they’ve always made? I hope- and believe- that it will be the latter.

Bottom line: VC money is good, as long as it is the right kind of VC. Sequoia is that right kind of VC.

Congratulations, Appirio, on securing some high quality (and, I hope, high value) funding. I know that this will cement your place amongst the top product companies in the sfdcverse, and will enable you to vault to the top in the pure-implementation rankings as well.

Best of luck!

David