Pioneers get arrows in their backs

Pioneers get arrows in their backs – I have experienced it firsthand from an active investor's viewpoint and written about it in the past.  Being early in a market is great but being too early can be deadly.  Just like the settlers in the westward migration, entrepreneurs who are too early will get arrows in their back.  It doesn't matter if you have a rock star CEO (Bill Coleman who founded BEA) and $100mm of funding from some great investors.  If you are too early and have to spend lots of money educating a market and get engaged in long protracted sales cycles and pilots, you are not going to be able to spend your way to success.

That is what it seems like is happening to Cassat Software. Forbes has an article about Cassat nearing the end.  On the surface it seems like the company was built for the right place at the right time helping enterprises save tons of money and run their internal data center like a cloud.  However the first funding went in 6 years ago and has totaled around $100mm since then.  Here is a quote from their founder and CEO:

For many years, Coleman acted as something of a prophet for cheap computing via the cloud, but he also thought it would mean a sharp drop in pricing with which the big companies would not be able to compete.

"The big guys copied my story," says Coleman. Cassatt, he adds, was upended by a slowing economy and by customers skittish about closing big orders or changing existing ways.

"What frustrates me is my own naivete," Coleman told Forbes. "I thought I could give companies something radical that had a proven return on investment, and they would be willing to change all their companies' computer policies and procedures to get that. Right now, it's hard to get people to get beyond proof-of-concept tests or a data center energy analysis."

He will be right eventually but will not have a lot to show for it.  A couple points to make – raising too much money too early can be harmful as it puts huge expectations on a company before it has proven itself and selling million dollar plus licenses into enterprises has gone the way of the dinosaur as only the biggest companies can afford to do this and it is extremely expensive to do.  Remember some of my old posts about frictionless sales and leveraging the web for sales/marketing and inside sales?  Having just participated as an angel in the recent Eucalyptus funding led by Benchmark, we are hoping to avoid this fate free download model which has generated over 14 thousand users, many of whom are corporate customers.  In addition, we have signed partnerships and are bundled in the Sun cloud computing initiative and the new Ubuntu enterprise Linux release.  Got to love leveraging partners and downloads to drive sales leads and sales.

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