Editor’s note: Software vendor Stelae Technologies provides a content extraction and automated conversion solution for multiple categories of content. Its product Khemeia™ is a cloud-based technology that combines multiple analytic methodologies into one product. In this interview, CEO and founder Aruna Schwarz discusses the unique nature of the company’s product and shares product development advice for first-time entrepreneurs and startup CEOs. This article is brought to SandHill readers in partnership with ProductNation.
SandHill.com: When and where was your company launched?
Aruna Schwarz: Stelae Technologies was launched in 2002 in Paris and was flipped to an Indian company in October 2012. It’s based in Chennai.
SandHill.com: How did your company originate — what inspired you to launch the company and what was the original vision/hope?
Aruna Schwarz: Stelae Technologies was born out of my experience as marketing director of a content management solutions vendor, where one of the service lines was manual and semi-automated processing of magazine and newspaper print content to create Web publishing outputs.
Khemeia originated out of the idea to create an automated conversion solution for multiple categories of content. My original vision to create a product company in the content analytics and conversion space has been rigorously maintained throughout and 80 percent of our revenues are from product sales (license and maintenance revenues).
SandHill.com: Please describe your company’s products.
Aruna Schwarz: Khemeia enables automated analysis, metadata extraction and structuring of unstructured content from multiple formats (e.g., PDF, Word, ASCII, HTML) and creation of multiple outputs (e.g., XML, XBRL, S1000D, Epub). It enables customers to produce structured, indexed, searchable and pertinent information quicker, better and cheaper.
The product has been developed from scratch and contains over 90 content analysis algorithms. The content categories we focus on are financial accounts, technical documentation, legal content (cases, judgments, legislation, statutes and regulatory information) and publishing (newspapers, magazines and books). We have processed over 10 million pages in multiple categories, formats and languages.
The other product in our portfolio is pdf2xbrl ™, an XBRL taxonomy editor with multiple accounting taxonomies (UK GAAP, Indian GAAP, etc.) integrated.
SandHill.com: Who are the funding sources behind your company?
Aruna Schwarz: My first investor, Barrington Davies (former MD of BT France, former MD of Business Units of Cable & Wireless), was my former boss at Cable & Wireless UK. Over breakfast in a café in Paris we discussed my business idea and he was excited enough to invest and also be the chairman of Stelae Technologies France. He continues to be an investor in the Indian company.
R&D, product development and customer acquisition has been funded with innovation grants from the French government, customer revenues and investment from angel investors in France, UK, the United States, Israel and the Indian Angel Network.
SandHill.com: Please describe how your product provides business value for your customers.
Aruna Schwarz: Khemeia enables up to 70 percent cost savings for end users and BPOs and faster turnaround times (two weeks compared to eight weeks). For the BPOs that currently use manual and semi-automated processing and separate work flows for each content category, Khemeia significantly reduces set-up times and costs.
SandHill.com: Who was your initial customer?
Aruna Schwarz: Our initial beta customer, Lagardere Active Media, is the leading consumer media group in France with over 80 titles including Elle and Paris Match. The CEO of the services arm of Lagardere was a customer at my former company and was excited to participate in the creation of a “product” to replace his content conversion services provider.
SandHill.com: Please describe one of your company’s lessons learned and where it occurred in the time line of your product development.
Aruna Schwarz: During the alpha and beta phases of our product development, we worked closely with our target customers in feature development. The “serious” customers were prepared to pay for the product license right from the alpha stage and our beta customer acquired a 60,000€ beta license.
This was an invaluable lesson and we have charged for every proof of concept since then, which enabled us to fund R&D during the initial phases of our development. Angel funding came in after we acquired our paid beta customers.
SandHill.com: Did your company change direction at some point during product development? If so, please describe what led up to the change.
Aruna Schwarz: Our product originated with publishing content (QuarkXPress and Adobe InDesign formats) and our focus in 2004-2005 was in the magazine and newspaper segments.
In 2007, a global player in the legal content space funded a proof of concept to enable us to move to new content types — cases/legislation and statutory content. And in 2010 a major aeronautics player funded a proof of concept in technical documentation. This led to our current concept of “one product for multiple content categories.”
SandHill.com: How did you determine the right pricing for your product?
Aruna Schwarz: Pricing models were worked together with our initial customers (always benchmarked against manual processing services currently offered by the BPOs) and have evolved from a server-based license plus annual maintenance model to the current usage-based pricing model with volume discounts.
SandHill.com: What are some of the expectations you had at the outset that you’ve subsequently had to change? What caused you to realize those expectations weren’t realistic?
Aruna Schwarz: We had anticipated getting an institutional funding round from VCs in France in the post-beta development phase of our software. The realization that over-funding in the R&D phase would kill companies was brought home vividly in the initial VC discussions we had and discussions with CEO of other software companies who had early stage VC rounds of one million € in the R&D phase.
None of the software companies that had VC funding in the R&D stage survived. Specifically in the 2004-2007 period, companies funded in France in what was then a “cool” sector — content management (more precisely, Web content management), XML repositories, search technologies, most of them me-too companies to compete with the “traditional” document management companies – Documentum, Hummingbird, etc. The money was spent on R&D teams building the perfect product for two years, with not a single sale during that period. We generated customer revenue from the alpha stage because it meant our survival.
SandHill.com: What is the worst advice you ever received?
Aruna Schwarz: The worst advice came from the partner of a VC fund that wanted to merge our fledgling company with a portfolio company they had invested 10 million € in – that company went bankrupt a year later.
SandHill.com: Who are the people behind your company (advisors, investors)?
Aruna Schwarz: The key team members in Stelae Technologies include Pierre Fraisse (CTO), who has been with us from the start. Pierre is a graduate of the Ecole Polytechnique in France and a leading expert with over 25 years of experience in semantic, search & XML technologies.
Frank Bevis is our COO. As CEO of Konnect Soft, UK, he was initially a Value Added Reseller in 2008. Frank has held positions in marketing, product management and sales with Agfa/Bayer AG, CA Computer Associates, and TFPL as director of the publishing division.
Other board members in Stelae Technologies include Chandu Nair (with over 20 years’ experience in the BPO/KPO sectors in India as founder of Scope Knowledge Services, which was acquired by Quatrro in 2008), and Revathy Ashok (from the Indian Angel Network).
SandHill.com: If you could spend an afternoon this month with a top exec in a well-established software firm to learn some insights from the exec, who would you choose?
Aruna Schwarz: Larry Ellison.
SandHill.com: If you could go back and live another business day over again, when would it be? What happened that day?
Aruna Schwarz: The day we got our first purchase order from our beta customer and money in the bank. Each purchase order gives me the greatest buzz and still continues to do so.
SandHill.com: What have you, as the company leader, found it necessary to do in order to build a corporate environment that will enable your employees to move beyond the early stage of a startup?
Aruna Schwarz: My personal role besides holding the team together has been to raise six rounds of funding with angel investors in Europe, Israel and India and create a solid base of contacts. Creating brand awareness and visibility for the company through participation as a speaker at various events in India and Europe and selection to organizations like Astia have created the foundation for the growth phase of our company.
SandHill.com: What do the next 12 months hold for your company?
Aruna Schwarz: The launch of Khemeia Version 4.0 with upgraded processing capacity (under one second per page). It’s currently in test phase and is scheduled for March 2013. Our focus is on increased customer acquisition in the legal content, technical documentation and company account processing sectors and acquiring additional partners in the categories of System Integrator Technologies in the UK, VARs and technology vendors. Also, an institutional funding round to accelerate growth and expansion.
SandHill.com: What’s your top advice for first-time entrepreneurs or startup CEOs?
Aruna Schwarz: Product development is a tough game, especially when you acquire your first customer and have to face implementation challenges while in parallel bug-fixing the software. Cash is tough (difficult to acquire new customers when product is still in nascent stage) — but do not be diverted/distracted to try and find other revenue streams (selling out your CTO on consulting assignments, distribution of other products, etc.). This will seriously compromise your own product development and any chances of building value.
SandHill.com: When you encounter challenges or setbacks, how do you pull yourself back up and become inspired again?
Aruna Schwarz: Customers, customers and more customers. Each time we had a serious cash setback, a new purchase order inspired me to carry on.
Aruna Schwarz, CEO and founder of Stelae Technologies, founded the company in 2002 in Paris, funded by a group of private investors. Aruna has prior experience in marketing, product management and business development in the telecommunications and technology sectors with BT (UK), Cable & Wireless (UK, France, EMEA), 9 Telecom (France) and Rosebud Technologies (a content management solutions vendor).
Di Freeze is editor at SandHill.com.