Algolia is a classic example of a business that successfully pivoted. It started as an offline search engine for mobiles but really took off as a real-time search API that’s experiencing fantastic growth. The French startup is now backed by Y Combinator and received a new funding round of $1.2 million this summer, bringing its total funding up to $2,8 million.
Nicolas Dessaigne, the co-founder and CEO of Algolia, has previous experience working on search engines and having been the VP of R&D and Product Management Director at Exalead.
He will speak at this year’s How to Web Conference’s Future trends & Entrepreneurship track about ‘How APIs Are Reshaping the Way Software is Build’, but we were also interested to discuss a little about its pivoting.
How to Web: Web search is more or less an established business model. What aspects of it do you plan to improve and how do you go about doing that?
We actually don’t do “web” search as Google does. We are a B2B technology provider. We provide a search service (as an cloud API), helping developers to deliver a great instant search experience in their own websites and apps.
Some say that Google’s “monopoly” on search hurt segments like quality long form publishing, niche websites, as not always one algorithm fits all. Do you really think we need more “specialized” search engines?
Yes, there is definitely room for specialized search engines, even if we are not one. I see two categories of “specialized” search engines: 1) websites and apps internal search, and 2) web scale vertical search engines (for exemple a people search engine like what is building peoplegraph.io in Bucharest).
We see ourselves as a technology enabler for these search engines. And having a good internal search is very important. If people don’t find what they are looking for on a website, they’ll simply go back to google to search for it, with a big chance of ending up on a competitor website. Proposing a seamless and relevant internal search is very important to keep visitors engaged.
What was your initial goal in founding Algolia?
Truth is, we started Algolia with a different product. We started by building an offline search engine able to run directly on mobile devices, and that developers could embed in their apps. We discovered the need for such a product by seeing many unanswered questions on Stackoverflow about this topic. We succeeded in building a great piece of software, but the market was not as interesting as we thought at first. We thus pivoted to a SaaS offer and this one took off.
Actually, a great part of our success comes from all the optimizations we had to develop to build an instant search engine on very constrained mobile hardware. We did many things we wouldn’t have even thought of if we had started directly with a cloud offer! Today these choices provide a huge advantage over competition!
At what stage in your startup’s development did you get accepted into Y Combinator and what were the highlights of that experience?
We both raised a round of €1.2 million and launched our SaaS offer in Sept 2013 (about one year after founding the company). We joined YC in January 2014 so we already had paying customers and cash in bank. While we were among the most “established” companies joining YC, it’s actually quite common that companies apply for YC at every stages.
It’s impossible to sum up YC in just a few words, it has been so incredible: very helpful alumni network, incredible partners, well-know brand are only a few of the great things. In the end, what helped us the most was probably our decision to rent a house and move the whole company (6 people at that time) there for the program duration. We worked 24/7 with only one idea in mind: growth! We did more in three months than we probably could have done in 12 months in any other context.
What did you wish you would’ve known before going through Y Combinator? How can founders better prepare for the experience of an intense, high-standard programs such as this one?
We probably should have reached out more to the partners during the program. They have an immense experience and their feedback can really help a lot to avoid mistakes and keep focused. But honestly we don’t really regret anything. 🙂
About preparation, it’s definitely a good idea to move everyone there if possible. Also it’s so intense that it’s easy to lose oneself in the company. Do sleep and practice some sport to keep in shape! Ah yes, and be ready to listen. Advice can come from partners but also from batch mates. You’ll probably receive some conflicting advice, but it’s always very useful. The best companies are the ones who are able to constantly learn and question their choices.
What indicators helped you acknowledge that you need to pivot and what changed after making this decision?
The low level of interest and the feedback about our first offline product. We did sign very interesting deals, but we didn’t see how the business could grow to sustain more than a few people. At the same time, many prospects loved the search experience we had created but they wanted it online.
Once we had pivoted, real change only came when we started to have beta customers. Their feedback made us realize we really had something truly valuable, they confirmed we had built a great solution for a very common problem. That’s when we knew we would be able to build the company we wanted.
What attracted investors to back Algolia with a total of $2,8 million in funding?
We closed our first round (Sept 2013) when we were still two co-founders and before to start commercialization. So investors were mainly attracted by our vision, our experience in the field, and the great feedback of our beta customers. It was a risky bet for them!
We raised an extension after graduating from YC (June 2014). That time, our traction was probably the most important factor. We had proved our market-fit.
How do you achieve customer satisfaction in a SaaS business? What is some general, useful advice that other founders can use?
Do care about your customers, all of them. Everyone say they do, but only a few companies really care. Whenever possible, we always go the extra-step to help them succeed in their use of the product. For example, systematically reaching out to propose our help during the trial doubled the conversion rate! You should also be proactive, don’t hesitate to contact them directly if you see a way they can improve their use of the product.
And probably even more important, try to empathize with them. Even if you are not at fault, listen to their problem and try to help. In the end, having very satisfied customers is what counts the most, especially in SaaS. It will help reduce churn and moreover lead to a lot of word-of-mouth recommendations! You never know where your next big deal will come from, possibly from the recommendation of a freemium user you helped succeed!
How do you believe that APIs will shape the future of SaaS products and the future of tech in general?
Marc Andreessen famously said that software is eating the world. Today, APIs are eating software. They are reshaping the way software is built, speeding up development time, providing access to troves of data, and enabling a new age of applications.
Already today, it doesn’t make sense to reinvent the wheel, it’s much better to rely on APIs built by experts whose success is directly related to their quality and reliability. If you need payment, just use Stripe. Communication? Twilio got you covered. And of course we are here to help for Search!
Will we see soon telco network APIs (operators releasing programming interfaces for applications to connect directly to their networks, Ed.) really implemented, and, if so, what will be the benefits to developers on one hand, and to customers on the other?
For developers the main benefit is an incredibly faster go-to-market. You can now create an app in a matter of days if not hours. Yo for example has been build on top of Parse in hours. With such solutions, it’s even possible to build rich mobile apps without having to take care of the backend!
But actually, most of the benefits concern both developers and customers. Access to rich APIs enable developers to add meaningful features at a very rapid pace and that benefits customers too. Relying on specialized APIs also means a much better reliability. Because it’s the lifeblood of their companies, API providers care a lot about fault tolerance and scaling, much more than any internal team having many features to develop could do.