Show 137 – Unicorn Interviews – Mark Lee – Splashtop
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The 18th in our series of episodes that we’re recording in partnership with the European PR Agency Tyto, around and their Own Without Borders podcast.
Russell Goldsmith and Tyto’s founder, Brendon Craigie were joined on line from California by Mark Lee, Founder and CEO of the Remote Access and Remote Support Company Splashtop. Founded in 2006. Splashtop raised $65 million in new funding at the start of 2021, which pushed the company’s valuation to over $1 billion.
Origins of Splashtop
Mark said thatSplashtop has a unique story, to the extent that its four co-founders have known each other since college days. They went to school together at MIT in Cambridge, Boston and have worked closely together since for thirty-seven years. Splashtop is actually their second start-up together.
Mark explained the Splashtop story started at a school entrepreneur competition, where the prize was $10K. Unfortunately, they didn’t win! They came were runner up. After MIT they went their separate ways to work at larger companies because they wanted to build a safety net first, and in some cases, pay off their school debt. However, their goal was to get back together after a few years of working and start something together. So, in 2000, they launched their first company together after 6-7 years of working at big corporations.
Their first start up was successful and was sold to a public company after four years of working in 2004. It was in server management space. In fact, today, HP, Dell, and IBM servers are still using their software from 20 years ago. It’s an embedded data centre system management software.
There was a golden handcuff in that deal, but after that success, they decided to start something new again. So, in 2006, the same team were still together, and launched a new company, Device VM, which later on became Splashtop.
Their first start up was in the server data center management and server market, selling around 10 million units a year. After that, they thought that the PC market is much bigger, with three to four hundred million PCs a year and so they decided to focus on the bigger volume market. However, back then, the problem, Mark said, was that Windows XP took forever to boot up. The more software you installed on it, there was the concept ‘win rot’, it just took longer and longer for Windows boot up. They therefore thought to give people an instant on browser OS and so Device VM (VM stands for Virtual Machine) was born. They shipped on HP, Dell, Lenovo, Acer, and ASUS. They were the platform to enable the netbook and shipped on over two to three hundred million PCs per year. Then when the mobile wave came in late 2009 on iPhone, iPads, etc, Mark said they knew their days would be challenged because a fast, full PC is not going to be comparable to a mobile device in terms of instant on, always on. They knew they had to pivot into the mobile space. They developed a new product, name was called Splashtop, and changed the company name to the product name for consistency.
The aim of Splashtop was to create a bridge between mobile devices and PC devices, and so remote access was the solution that they thought will be the killer app on the mobile side and that allows you to remote control and manage your PCs, too. They first launched their app on iPad, and Mark said it’s really that consumerization usability that they focused on. They were actually so successful on the iPad App Store, they were even beating Angry Birds in any chart back in 2010/11 and for many months, were actually the number one selling app on iPad, beating every application, even games. Mark thinks that when people first got their iPad, there were not that many applications on and so the first thing they thought about was, ‘Oh, what if I can access my Windows or Mac applications and data that’s out there?’. That’s what they built their brand on – the whole consumerization and ease of use and people loved their product, the performance, even streaming 3D games. This meant that when people were streaming their PC games and started posting their videos online, which tended to be viral, Splashtop were getting hundreds of thousands or millions of views, which helped to quickly establish the brand in the consumer space. Mark added that a lot of IT people are MSPs are gamers, too. So, they saw Splashtop, and started thinking, ‘Oh, OK, well, this is so much faster than what I use today at work’. He said like a lot of them used LogMeIn, TeamViewer, or other remote-control apps, but didn’t have that level of performance. However, Splashtop was missing a few manageability features, and they wanted to support customers more, so they listened to the feedback from those IT and MSPs and added those features through the years. Now, 98% our Splashtop’s revenue is B2B.
Mark said that the whole shadow IT wave and BYOD wave have helped them to expand into the market, but ultimately also really listening to the customer. In the early days and even today, he still goes on discussion forums to help users because he wants to know how people are using their product. He is personally always involved trying to make sure their customers are happy too.
Impact of the Covid pandemic
Mark said that the only silver lining in the pandemic was that their business has grown over 160% a lot in the past year, just like people hear about Zoom and others because of the need for remote work, remote learning. He explained that in the past a company might have only a few people needing remote access, but during a pandemic, everyone needed it. Therefore, a lot of their customers expanded the number of seats – they charge per seats – and that has continued to propel their business. Schools have been coming to them to enable remote labs. In fact, they did a survey and approximately 90% of the students really see hybrid learning as the future. Splashtop’s remote lab has enabled many schools that have physical labs that run Adobe software, AutoCAD software, specialized software, which require high end workstations, to extend out to students at home with any BYOD devices. Similarly, corporates including Disney, and a number of animation companies, CBS, NBC, golf channels, et cetera were all customers during COVID, as they needed to do remote video editing and Splashtop provided full performance, so a lot of different studios, games studios, all came to them. Also, COVID research, and medical equipment companies came to them as their doctors needed to do research on Alzheimer’s and also COVID research, and they’ve been using their product to enable remote research. Mark said they feel very gratified that they have been helping out all these businesses and schools to be able to continue what they need to achieve in terms of their goals – he said it’s been a blessing.
The remote economy
Mark said that people recognize that VPN is broken. Today’s VPNs, it’s based architecture from 20 to 30 years ago, but more and more workflow applications are moving to the cloud. Today we’re using Office 365, we’re using Salesforce. More and more application workloads are in the cloud and our employees are everywhere. Our employee is no longer confined in the corporate network. So how do you define that corporate parameter? The firewall was designed to assume everyone is working in the corporate network, in the data center, et cetera. So, Mark thinks that the whole security architecture is being rethought and during COVID, they saw a lot of customers bypassing the VPN using Splashtop. It’s because the scalability, security challenges, et cetera, that people are facing. He thinks a lot of people are talking about this whole cybersecurity risk, it’s front and center for many business concerns. Ransomware is everywhere, and so they are seeing an opportunity to build a stronger, better solution to protect users whatever they want to do remotely. Remote is a new norm.
Becoming a unicorn
Mark told his team two years ago, pre-COVID, that their goal was to become a unicorn in two years, but the pandemic really accelerated it and so they achieved it in one year. Obviously, people were ecstatic and proud that they had been able to do that, but at the same time, they were achieving it while helping the world address the whole pandemic challenge. So, it was a proud moment for them. However, he said that as a CEO, his challenge to the team is, what’s their next big goal? They have been profitable for years since they pivoted the business from Device VM to Splashtop and hadn’t haven’t fundraised for over 10 years. They were bootstrapping after that pivot and so bootstrapped to become profitable and cash flow positive. When they did the unicorn round in 2020, they were actually generating tens of millions of dollars already. They did not need to raise a round but did so primarily to elevate their brand and wanted to begin to position themselves towards IPO and needed to attract talent. So, in the past year since Unicorn, they brought in a CMO, Head of Sales and expanded their team significantly too. They continue to generate millions of dollars cash flow per month and still haven’t touched a single dollar of the money they raised.
Communications and culture
Mark said that because they have four co-founders who’ve been around for 30 years, they are like a family. What really differentiates them from other companies that he has come across or worked for is he thinks they continue to have a great family caring culture. Because the four of them behave in the same way more or less, he thinks this culture permeates across the company. They care about every employee and the employees care about the company and then in turn he believes they care about the customers. It feels like it’s a big company. The team is very focused on customer success. They want their customer to be very successful and it has been reflected in their NPS. Every time someone uses their product, at the end of the product session, it will prompt a rating – in fact, they were one of the first companies to start doing that. So, they really care about ensuring that user experience is always top of mind. They also have a very transparent culture. They share their financial information with every employee and every employee is a shareholder. They want them to be successful financially when they succeed. Everyone knows how much revenue they generate per month at the end of the month, how much profit they generate end of the month, and they want to make it clear that everyone can make a difference. They try to hire the people that are good fit for the culture too. He said that a lot of times, a lot of companies, when they try to accelerate their growth, they hire very quickly and then they try to churn. However, Splashtop spend time making sure people are a good fit because they actually have been trying to slow down hiring to make sure they have the right people joining them. That’s actually more critical in their mind to preserve this culture and have fun. Mark said that life is too short and all four of the founders are fun loving people and enjoy the whole journey of learning. They want to be sure that everyone has great career goals, personal growth, financial success all together in this whole journey while having fun together.
Despite having remote work solutions, pre-COVID, most of Splashtop’s employees were in the Silicon Valley, so Mark said it’s been somewhat of a learning process for them as well. Fortunately, because they have good remote solutions, all of the team were instantly ready work remotely and as they grow, they have started hiring people all over the U.S – their CMO actually is based in Denver and their Head of Sales in Texas, plus they now have employees in New York, in Georgia and all over the U.S. Mark used the phrase ‘we eat our own dog food!’. They also use Microsoft Teams and because they have a very open, transparent culture, he is constantly sending out updates with the team. They have scheduled monthly town hall type meetings allowing employees to ask questions and discuss things that are on their mind. They also put together a remote work package to for employees because they recognized that not everyone has a strong internet connection at home, so they have a subsidy for that, plus some people don’t have a good monitor at home, so they have subsidy for that too – different things to make sure that everyone can comfortably remote work.
External communications and being a representative of the company
Mark said when hefirst started, he spent a lot of time talking to venture capitalists and so had put together [pitch] decks to convince people to put money in, which he feels is the number one challenge in starting a venture. Through the years he thinks he has got better and better at it. He actually always viewed himself as an introvert. So, it’s been a bit of learning. But compared to many of his MIT colleagues that he has seen, he now thinks he is actually an extrovert, and actually out of the four co-founders, that is the reason he is the CEO as he can communicate better and convince the venture capitalists better! He said it’s largely a learning process and it’s a forced function when you have to raise capital. But obviously, with a unicorn round, with preparation towards IPO, he will have to face a lot more public analysts, et cetera, that they need to prepare towards. His marketing team is putting together a media training plan for him. He also said that getting on the stage is a little bit different from to a Zoom call too, so, he is sure there’s going to be a lot of improvements.
What initial decision is most vital to building a successful business?
Mark said it’s the team. He added that people are always are amazed that he and his cofounders have been friends for 37 years and in business too. There’s always going to be a lot of disagreements when they discuss different business topics and have different views of priorities. But the trust that they have built is unparalleled and they know one another’s strength and weakness so can execute fast. They that that’s a strength that they have and there is zero politics. It’s all very open communication. They know that any disagreement is about the task and that it’s not personal. Sometimes people might feel it is personal, but after a few drinks, they are all good and back to where they started, so again, having fun. There’s a lot of off work gatherings too as part of that whole culture and relationships. He thinks that because it’s a long journey, there’s going to be a lot of ups and downs. But he views building the right team is so critical in this whole process and even finding the right investor is part of that whole process too. In fact, most of their investors for Splashtop were in their previous company. When they sold their last company and were ready to start a new company, two VCs that invested that prior company came to Mark and said, ‘It doesn’t matter. You don’t need a business plan. Whatever you guys want to do; we’ll be funding it’. Since 2006, a lot of VCs will usually have exited, or tried to sell their position, but Splashtop’s have stuck with them despite the downs.
When they started as Device VM, they had to pivot at its peak. They had around three hundred employees in 2010 and were shipping on three hundred million netbooks, PC, OEM, notebooks etc, per year. But when they had to pivot, their revenue was declining, and so they had to lay people off. As a start-up CEO, he is always super optimistic, and he felt he could drive new revenue to compensate for the declining revenue from the old business very quickly. But it didn’t happen as quickly as he liked, and they had to let go of people through a process of a year and a half. They had to downsize from three hundred people to 60 people. That was really painful because he was really optimistic that as it’s a family, they didn’t want to let go of these people, and could figure a way out and to grow new business. But it didn’t come in as fast to support such a big organisation and in retrospect, he thinks it definitely would have been better if they had cut harder and faster versus extending that drive. It was tough on the founders, too, because a lot of them had to talk to someone like to a family member. Mark said he wouldn’t say it’s a big mistake but more a lesson learned.
Biggest communications challenge
Mark said that their communication has not run into too many challenges, because they have just been very fortunate in terms of staying open, communicating with all employees. They are very transparent, including their pricing – customers know what they’re getting into. They have a seven-day trial. Over half of their trial sales convert without them ever touching them. The product speaks for itself. They have great customer support and so, have not had to face too many communication challenges both externally and internally. However, following the unicorn round, with their new CMO on board, and marketing team in place, they are making investments to up their branding and communications upmarket.
Mark thinks remote work and remote learning is here to stay and the need for a secure remote access solution is super critical for our future digital economy. How do we prevent all these cyber-attacks effectively and with the ease-of-use product because security and simplicity always count full diagonal. It’s difficult to build a secure product that’s not complicated. It can get very complex, and so Splashtop want to play a critical role in that whole process to make deliver a much better user experience. Complexity comes with a lot of investments. Then it’s down to the people, their team – they want to be sure everyone is growing more professionally as well as personally. And then finally, he believes everyone should enjoy the financial success together.