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Sigh. I will defend -- till the end of days -- the media's right to report critically. But I also defend my right to take issue with a piece like this. At best this Forbes article doesn't understand how startups work. At worst, it exaggerates and then criticizes the wrong things.
I'm not an investor in ScaleFactor. I met Kurt months before he started his Series A raise. I was instantly a fan and worked on diligence for weeks. We ultimately passed for different reasons, and I regretted it. Kurt struck me as a wonderful, no-nonsense CEO with integrity.
The article says the co did manual accounting in part. +So do their competitors. They never hid this from the early days. You can't automate accounting in one go. Human in the loop automation are the legs most SaaS products stand on. They didn't lie. What here is news worthy?
If we wrote news stories about every unhappy customer who wrote a bad online review, the news industry would need to hire 100K more reporters. Customer churn is not news. These are growing pains. Lots of them have choice words. Qualitative feedback is not representative.
Talking of qualitative feedback, this article names 3 customers and a couple of anonymous employees. Without knowing details, I surmise SF had hundreds if not thousands of customers. The article presents no numbers. I can bet the best cos have 3 grouchy customers. Newsworthy?
"But in reality, the tool was glitchy and couldn't be relied on to accurately sort transactions" - So the tech wasn't fully baked. SO? Customers pay for a service. Whether that is accomplished by code or a carful of clowns is barely important if the product delivers.
The article notes 'a customer lost $17K which the company refunded her for'. This shit happens. What matters is if this happens 1% of the time (shrug) or 10% of the time(uh oh). Why is this anecdote newsworthy?
Yes, and if you've looked at more than one balance sheet, this is immediately obvious that the product relies on services teams which reflects in the margins. One person's inability to read a P&L is not creative accounting. Nor is it hiding.
"The sales team was too aggressive with selling the product ahead of a fundraise." - GASP. How do poor VCs account for this bluster? Spoiler alert, it happens every single time, even with now lauded companies. What here is news worthy?
So the company made it hard for customers to cancel subscriptions without giving them offers/discounts or coaxing them to stay, just like, every other enterprise subscription business besides...<checks notes> The New York Times? What here is newsworthy?
I don't know why I wrote this thread. I met Kurt many years ago and he struck me as one of a kind; a genuinely good leader, a hard working, modest CEO who deserved to succeed. I don't know anything about the business more recently. Just enough to know this article is crap. End.
