Thursday, June 30, 2016
How Kaleo Is Tackling Enterprise Knowledge Sharing
Story by Benjamin F. Kuo
Phil Hui-Bon-Hoa, the CEO of El Segundo-based Kaleo (www.kaleosoftware.com), is a serial entrepreneur who has previously built and sold four companies, including one acquired by IFILM, and another by Sun Microsystems. He's now hard at work at a new company, Kaleo, which is tackling the enterprise, knowledge sharing market—and already has an impressive list of Fortune 500 customers. We spoke with Phil about his new company, which is backed by OMERS Ventures, Saturn Partners, Karlin Ventures, Qualcomm Ventures, Double M Partners and Greycroft Partners.What is Kaleo?
Phil Hui-Bon-Hoa: If you have ever been in a position where people come to you to as for help, you find that you end up answering lots of the same questions, over and over again. That ends up being a waste of time, especially in larger enterprises. Gone are the days when your boss is setting next to you. Everyone is now remote, using different devices. We're trying to save companies money, and increase the productivity of employees. The idea of waiting, asking, and waiting for answers is gone. Now, you can effectively have those answers at your fingertips, from experts, who can explain those answers once, rather than repeating themselves over and over again. That can be a subject matter expert, product head, a sales head, any category in the enterprise, and they can use our lightweight platform for answers. We've created an easy process for big companies to build a living knowledge base. This is not the traditional knowledge management, instead, we've created something lightweight. Today, especially as employees come and go very quickly these days, and when the knowledge about your company is resident in your employee's heads, the more you can capture when that employee is working for you, the better it is for your company.
How did the company start?
Phil Hui-Bon-Hoa: I was in a conversation with the CMO of GE a bit before starting the company. He had 5,000, B-to-B marketers across various divisions of GE, and they really never were able to help each other. It's not that they didn't want to help each other, they didn't even know they knew the other existed. In B-to-B marketing, it ends up that there were people at GE Capital doing the same jobs at GE Healthcare. They might not even know they exist, and even if they did, there was no way for one group to ask another questions, and provide help to one another, share best practices, and make that available to the other 5,000 employees. This was her pain point, back in our early days in 2011, and at that time, social was starting to become big. There were things like Yammer, Jive, and all that. However, rather than create a Facebook for the enterprise, we focused in creating something, not for posting social stuff, but for asking questions and ideally getting answer from people who had answer. We founded the company, on the notion of creating something for the enterprise, which was more Quora-esque, rather than like Facebook and Twitter.
You have quite a stable of large, Fortune 500 companies as clients, how did you manage that as a startup?Phil Hui-Bon-Hoa: We have 35 customers, all of whome are very large, blue chip customers. Effectively, with the pain point we address, the larger the company, the more acute the pain is, as it relates to sharing knowledge for employees. They've been experimenting over the last few years, trying traditional Internet portals, and other experiments with social products—however, they've been seeing that social is just not generating the ROI that has been promised. Companies like Jive are not doing as well as they have hoped. We stuck by the core, and rather than generating more noise in these large enterprises, we've focused on enabling the experts in these big companies to provide their know how, once, for everyone else.
What was your background, before starting Kaleo?Phil Hui-Bon-Hoa: I've been fortunate enough to have built and sold four companies. The first I sold was across the street, in El Segundo, and sold for $42M. I organically built the company, and didn't have any outside venture money. Subsequently, I built another, similar company, which I sold to Sun Microsystems, and then started a B2B, online exchange with my current CTO, and sold that to IFILM, which was subsequently acquired by Viacom. I recently sold an instrumentation and sensor company, founded in the Bay Area, with a Stanford physics professor, and we also sold that for a good multiple. I have never raised outside funding with those companies, and all those companies targeted an acute pain point, but those markets were not as massive. With Kaleo, I figured out from day one that we would need to raise outside funding. I have been in the Los Angeles ecosystem for many years, and have seen it evolve, and there has not been a better time to raise seed money. We raised our seed money in 2013, and we stayed local. Our seed investors were all, Southern California based investors. Since Kaleo is a big play, we also went out and raised venture money. That' s been different from my other companies, which were smaller plays and privately owned.
What's the biggest lesson you have learned so far, compared with those other companies?
Phil Hui-Bon-Hoa: I think the biggest learning lesson so far on this company, is that with an investor providing funding, you're racing after revenues rather than profitability. With my other companies, where we didn't have outside investors, the focus was on growing organically, and the balance between profitability and growth. For Kaleo, it's all about how we're spending our cash. From the team perspective, I've also aged—I'm not a young buck anymore, I'm 47 this year, so we've hired the best and empowered the best to build a team. It's no longer Phil the micromanager, it's workign with the team, and creating a team of rock stars. With Kaleo, it's all about getting to perfect product-market-fit, putting fuel into the fire, and raising our Series A, and letting our team work cooperatively rather than having me at the center. It's all about revenue and market share right now, not about profitability, and the focus is primarily on growth. We want to delight the end user, and want to create a really, highly addictive product here.
How has it been building an enterprise software company in Southern California?
Phil Hui-Bon-Hoa: We see that the days of the early adopters, tech companies only being in the Bay Area is no longer the case. I think that, because of software-as-a-service and the cloud, companies no longer have to invest $50,000 or $100,000 in software, that geographically, you don't have to be as close to Bay Area companies. That said, we still have a lot of Bay Area customers. However, because the cost of access to your products is a lot lower, it's a lot easier to get critical mass. Plus, I feel like we have everything here in the ecosystem to thrive. There are not only entrepreneurs, but also funders, the check writers, and the talent pool. Back in the 1980's and 1990's, you had to be in the Bay Area because that was the customer base willing to experiment with new products, because they were all tech companies. However, I think all companies now are okay with trying new software here. Back in the 80's or 90's, you weren't going to get a Disney or Northrop Grumman to try software from a new startup in Southern California. But today, because of the low cost of entry, you have the Northrops of the world trying things out. We have a pilot with General Electric, and once upon a time, it was unheard of having them working with a company of our size.
Thanks, and good luck!