It was several months ago that I last published part of my interview with Kathryn Kranen, Jasper Design Automationís CEO. You may have seen the other day that she is to be honored with the UBM Tech ACE lifetime achievement award. Kathryn knows how to take a technology and move it into mainstream, something she has done several times now. In this final part of the interview she demonstrates one of the ways in which she imparts very different and successful business strategies related to how she does business and ensures that both the customer and the company win from every transaction.
Brian: Let's talk about EDA value. Do you actually believe that youíre getting fair value for what you provide, or is the whole industry still not paying enough for EDA?
Kathryn: Yes, I think weíre getting fair value for what we provide. We hold out for fair value. Maybe thatís why we have relatively few customers, but those customers are winners because they realize net cost-savings by using our solutions. They are the ones that recognize the value and are willing to pay for it. There are some quite notable companies (I wonít name) that arenít willing to pay fair value, and guess what, we walk away, sometimes multiple times. What is fair value? Itís what the market will bear. We donít get to name the fair value; itís what the customers are willing to pay. "Beauty is in the eye of the beholder", and the customer is the beholder. We price based on what percentage of our total energy we will need to spend on a customer to ensure they get the value they are expecting. Thatís how we established our pricing model years ago, and itís worked. Weíve grown steadily and have been very healthy. Sometimes, Iíll have semiconductor companies or system companies that are not currently my customers say ďif you donít give me this price Iím not going to buy,Ē and Iíll say to them, ďso, which of my other customers are you expecting to subsidize your discounted use of my tools, because weíre using our collective resources to ensure our customers are successful and to be sustainably, and profitable. If I donít generate enough business out of your slice of our available revenue-generating resources, somebody else has to pay more. Which of your competitors do you think wants to step up and do that?Ē
Brian: I have heard that Jasper has or had a policy of restricting the number of customers that they take on so that they can deal with each of them on a partnership basis, rather than just sell them a product and let them get on with it.
Kathryn: In the early days, we could only afford to take on a few serious customers, so we were very selective. We donít restrict our number of customers anymore. It is more that our customers self-select because what we sell is a high-end, high-value product, and people self-select based on price. We have priced based on resource so that we know that we can continue to sustain a profitable company. Do we want more customers? Yes. However, I donít want a customer for the sake of saying I have ďnĒ accounts. If you look at most mid-sized companies in EDA and the fact that a huge percentage of their revenue came from the top customers, 80% or somewhere thereabout, youíll ask yourself what is the cost of having another 125 customers for 20% more revenue? There is so much cost there, what is the viability of that business? So you have to look at the tiers of the market and ask, is each one a good bet. Iím really happy when we get new customers. The new customers that weíre getting are mostly still top tier, though some are quite small.
Weíve built a company that's bigger and more profitable than almost all prior EDA IPOs, so we donít feel the need to just have a bunch of logos. Sometimes people get false validation from a headcount of customers and logos, and that is very misleading. It doesnít mean that they will be economically viable. Unfortunately, a lot of start-ups rush off and want to get 10 logos, but if you went and talked to those customers, they'd say, oh yeah, we have one of those. Itís a little experiment, a trinket. Itís so much more important that your customers see that the technology really works and delivers net cost-savings. We deploy our technology and weíre delivering bigger ROI, and they not only renew every single year, in fact they grow every year. I donít care about the number of accounts; I care about having a successful company with whatever number of customers, where weíre highly relevant and actively used. So, I think thatís another caution to start-ups, donít be misguided into thinking I should go take cheap logos just for the sake of having a high customer count. People are going to see through that, theyíre going to look at the bottom line. They are going to look at how much revenue you are producing from those customers, and how profitably you are operating the company.
You need to provide value. You wonít grow if youíre not providing value, and if providing value requires you to invest resources in a customer, you have to generate enough revenue to pay for that investment. Thatís the decision we made in 2008 that caused our explosive growth. We recognized that we were growing well where we were helping the customer to accelerate new methodologies and train the users and develop the applications.