In this final part of the interview with Jasper's CEO Kathryn Kranen, she talks about their unique way of doing business and how Jasper creates value for their customers at a fair price...
It was several months ago that I last published part of my interview with Kathryn Kranen, Jasper Design Automation’s 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 you’re getting fair value for what you provide, or is the whole industry still not paying enough for EDA?
Kathryn: Yes, I think we’re getting fair value for what we provide. We hold out for fair value. Maybe that’s 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 won’t name) that aren’t willing to pay fair value, and guess what, we walk away, sometimes multiple times. What is fair value? It’s what the market will bear. We don’t get to name the fair value; it’s 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. That’s how we established our pricing model years ago, and it’s worked. We’ve grown steadily and have been very healthy. Sometimes, I’ll have semiconductor companies or system companies that are not currently my customers say “if you don’t give me this price I’m not going to buy,” and I’ll say to them, “so, which of my other customers are you expecting to subsidize your discounted use of my tools, because we’re using our collective resources to ensure our customers are successful and to be sustainably, and profitable. If I don’t 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?”
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 don’t 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 don’t want a customer for the sake of saying I have “n” 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, you’ll 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. I’m really happy when we get new customers. The new customers that we’re getting are mostly still top tier, though some are quite small.
We’ve built a company that's bigger and more profitable than almost all prior EDA IPOs, so we don’t 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 doesn’t 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. It’s a little experiment, a trinket. It’s so much more important that your customers see that the technology really works and delivers net cost-savings. We deploy our technology and we’re delivering bigger ROI, and they not only renew every single year, in fact they grow every year. I don’t care about the number of accounts; I care about having a successful company with whatever number of customers, where we’re highly relevant and actively used. So, I think that’s another caution to start-ups, don’t 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, they’re 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 won’t grow if you’re 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. That’s 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.