September was an exciting month for the French Tech ecosystem with one of its SaaS champions exceeding $1.5B valuation; and also for Elaia: we welcome a newborn in our unicorn stable, with Mirakl, the only marketplace SaaS platform that empowers both B2B and B2C organisations to launch and grow an enterprise marketplace at scale, proudly joining Criteo to become our second seed-to-unicorn investment with its Permira led $300M Series D round.
If once could be luck, twice could be the start of a pattern, so let’s try to answer this billion dollar question by sharing the lessons we sometimes learned but mostly confirmed, during this incredible 8-year long journey where Mirakl went from a boutique with a product under development to a fast-growing, profitable, global SaaS leader in the e-commerce arena. And if you want to know more of their history from seed to series C, check out here.
Lesson 1: Billion dollar founders are not just great, they play in another league
Everyone knows that the quality of the founding team is the 1–0–1 of entrepreneurship and venture investing; we learned which, amongst the many qualities a founding team must have, makes a good team an outstanding, world-class one. Of course, Mirakl’s founders are motivated, skilled and complementary as they should be. Philippe is a self-made man, incredibly sharp, an e-commerce visionary, combining unseen product skills & world-level market expertise. On the other hand, Adrien is a highly educated citizen of the world, a great brain combined with tremendous execution capacities and salesmanship. He could convince anyone to buy into his will and join his leadership.
However, what makes them outstanding is that they are over-convincing, they look for money to accelerate and not to merely move forward, and they carefully listen to any feedback - even if they can be sometimes a little hard to convince, especially when negotiating with them!
This is very unique, especially the last characteristic. Philippe and Adrien actually changed their mind whenever they were convinced, after our thorough and intense discussions, that they were wrong, or at least suboptimal. What they were looking for was neither a bossy investor nor a yes man who confuses the concept of entrepreneur friendly behaviour and opinionless groupie. A real sparring partner. It takes confidence for a CEO to accept contradictions — and this is the sign of tier-1 people.
As their track record shows, the combination of both is a weapon of mass construction and more than anything else, they are the most entrepreneurial founders I have ever met: their picture should be used on Wikipedia to illustrate the concept.
Lesson 2: If you are not scared to swim alone and fast, jump and conquer a blue ocean
Mirakl’s product & market vision has been outstanding since the start of the company. We are not saying that the slides were good or that the prototype was working well at the beginning.
Just that they saw something was happening at a sufficient scale to create a software company about it. The e-commerce world (and then the B2B e-business world) was definitely shifting to the platform economy and there was no real off-the-shelf Marketplace cloud solution to address it, while Magento (now Adobe), Demandware (now Salesforce), Hybris (now SAP), Shopify (now listed) etc. were shaping the transactional side of the market.
Being so advanced in product & market vision led them to rapidly become pioneers in the e-commerce space and be (mostly) the only player educating the market and now surfing it. Being alone in a blue ocean, with a few pale copycats swimming after you, is great even if this is normally not the sign of a hot market opportunity.
It is fair to say that in the early days, Mirakl’s potential market size was not obvious to everyone, including ourselves: there were a few headwinds which could have led Mirakl to remain a small company. The two main ones: (1) the number of customers they could approach was initially impossible to estimate and (2) for many of their potential customers, Amazon, Alibaba, eBay & co, that were thriving, made them feel that, although Mirakl was right and a marketplace could have helped them, maybe it was too late.
But this platformization trend was part of our investment thesis back then and the founders were over-convincing that it was the right time and the right place to be: after the initial investment committee mid 2012, our conclusion was not only that we had to do the deal but also that we should consider buying them a marketplace (even if it was not that clear what we would actually do with it!).
We funded them without the certitude that this nascent space would be unicorn-worthy, but with the certitude that, if the opportunity was there, they would tackle it.
Lesson 3: In (real) tech, the quality of the tech actually matters
Philippe and Adrien are not software people, even if they are actually world-class level there too. They are retailers in their mind. They think as their customers do. Philippe built the product he would have dreamt to have as a retailer; with the most important quality being that it delivers 100% of its promises without any downtime. Simple but crucial: delivering means extra very profitable revenues and downtime means an irrecoverable loss of revenues. One of their largest customers told me once that the Mirakl platform was a Swiss manufactured watch: you are assured that it will never fail you.
Lesson 4: If your success comes from your customers success, you will grow by just existing
Mirakl’s business model, equivalent to Shopify’s, is designed to align interests. The more extra business the customer is generating on Mirakl’s platform, the more interesting it is for Mirakl too. Its future growth will come as much from its striving new business than from successful existing customers.
As a consequence, Mirakl has a metric which is the sign of great subscription businesses: it has a net retention rate way above 100%. This metric equals the N revenues from your N-1 customers. This metric synthesizes churn and upsell. When you are above 100%, say at 130% as an example, it means that you start every new year with 30% of growth from your existing base. You just grow by continuing to operate. Imagine the total growth you’ll get by adding new customers and the eventual massive profitability you can achieve, on top of it!
By the way, understanding Mirakl’s business model solves the market size equation: if you see its revenues as a derivative of its customers GMV, then the limit is beyond imagination… To give you a hint that they were right, Mirakl now has over 300 customers in 40 countries, and during the first half of 2020, during the COVID crisis, Mirakl-powered Marketplaces generated over $1.2 billion in GMV, representing an 111% year-over-year increase.
Lesson 5: We all know that execution is key, so do it well and just focus on that
After 8 years, we can tell: there have only been great years for Mirakl. Even if the management felt that every quarter was a challenge and that some years were not as good as they wanted them to be, execution was stellar and I wish all our companies would have years as strong as each of theirs.
The three most important ingredients of this outstanding execution were :
a) assembling a top notch operational & international team (with Florian Bressand, COO, joining early as the lead manager of this team constitution). Sounds classical but it takes guts to hire senior people with packages that look like a decent pre-seed round. And convincing these very well paid people to accept a cut on their cash compensation against options implies, again, over convincing founders. But it seems a bit unfair to only mention the later arrival of very senior people as a key success factor. As Philippe told me once, “We were lucky to assemble such a talented team of loyal, efficient and passionate people around us, since the very beginning of Mirakl.” And he was talking about Nagi, Arnaud, Matthieu, Christel, Mathieu, Kelly, Jane, Laure, Joseph, Victor, Nelson, François, Kamal, Henri, Joseph, Benoit, Antoine, Ophélie, … Of course, we cannot mention the hundreds of them (and we apologize for that) but each of them brought a brick, if not dozens, in the construction of this unicorn.
b) making this team work as a precision machinery. Growing and hiring fast in a more and more horizontal structure can create alignment issues when it comes to leadership. In Mirakl’s case, the leadership is clear and not discussed and the chain of command is also clear and respected. This company clearly has a route to follow and leaders to drive it through.
c) committing the entire team’s energy to the company, its customers and its investors. Mirakl is probably not the most famous company within the French Tech ecosystem but don’t worry, they are well known by those who need to know them.
Lesson 6: Becoming global starts at DNA level: founders & investors
Mirakl is now a global company with hundreds of customers and employees spread over the globe. Even if they signed very early customers from several countries in Europe and even APAC, and hired a few nationalities in the early team, they really started the transformation from local champion to global leader when Adrien moved to Boston, alongside the Series B round in 2015 with tier 1 UK based investors and finished the process with the Series C funding in 2019 adding a great US VC, and the spreading of the senior management in Paris, Boston, London etc. Expanding globally is not only great when you look at the customer base, but it also means that you have subsidiaries in many countries, dramatically increasing your hiring reservoir when it comes to senior management.
This is a very well known and repeated characteristic of our best companies. Global success in software implies to be a leader in the US. To achieve that, you must send your best people there, i.e. founders! That is why we were the first to tell Adrien that he should start to prepare himself and his family to go back there in early 2014.
Lesson 7 : Great startups models are easy to describe and understand
Many companies launch new products and business lines when their first product has not reached scale-up phase, or add huge complexity in margin computations to hide ever loss-making models (remember the insane WeWork “community adjusted EBITDA” concept). Actually, great startups can be audited in 10 minutes: one major offer, one single billing model and a straightforward cost structure, leading to an EBITDA which actually means something. No “proforma”, “adjusted”, etc. lingo. Mirakl definitely does what they say since day one, and their accounts are crystal clear about it.
Lesson 8 : A functional & professional board makes the company more agile
When it comes to “hands on” VCs, an infamous joke states that the strongest added value of a “hands on” VC is to not add negative value as a board member.
How much value was chopped off from decent companies by conflicts or a lack of understanding at the board/shareholders level? When you are successful, you can actually choose amongst many belly dancing investors when raising a new round. Great companies choose very well. Mirakl built a super effective board where any discussions happen freely, and solutions in the best common interest are always found. And independent board members are key not only to enhance the company’s profile and expand its network, but also to help when misalignment starts to show up.
For the anecdote, in the 2012 seed pitch, Mirakl had a slide about an inspiring company they would like to follow the path of: the then recently listed Demandware. Tom Ebling, Demandware’s CEO at that time and until the multibillion acquisition by Salesforce, has been at Mirakl’s board for over 3 years now!
Lesson 9 : Simple & fast fundraising processes create more value than the terms they carry
Fundraising is always a distraction, even if it is a fundamental part of a CEO’s job. Good companies do it at a fast pace, at the right market timing and get enough offers to optimize on quality and not quantity. They target new investors complementary to their existing pool. And as a consequence, these super effective rounds end up oversubscribed.
Every round in Mirakl was fast and with a great outcome. By the way, their equity story also fully justifies our positioning to invest early in future French unicorns; Elaia, as the seed lead investor, has always been the only French VC around the table.
If you ask me which round was the most efficient and less dilutive, I would say Series A. Mirakl started so well that they got cash flow positive for 2 years in a row after the 2012 Seed round. We just relabeled the seed round, Series A, and moved to raise the €15M Series B in 2015!
Lesson 10 : Imagination & execution must be the only limits during the take-off phase
Mirakl opened new markets (B2B marketplaces, catalog management etc.), created a partners’ ecosystem, opened new geographies, established strong partnerships with software giants etc. without ever thinking of themselves as a small French contender on the global US dominated software sector. Clearly, management was there to build a long-standing independent company, which might end in the software vendors hall of fame, ie. listed on the Nasdaq. Nobody builds a real unicorn on the mere idea of selling it quickly, even at a nice price.
So here we go again, with a second unicorn that we funded at the seed stage This time, it’s about a global SaaS leader, at scale, born and still HQed in Paris, without serious contender, on its way to another attractive IPO, and following a pattern that we are getting to know well. Actually, writing down these 10 lessons reminded me a lot of Criteo’s story. Maybe luck is definitely not the only reason…
And for our Mirakl’s founding friends, we would love to hug them, if it wasn’t COVID times, to thank them warmly for letting us be part of their fantastic journey. It is not only very enriching, in every sense of the word, but also a lot of pleasure and fun to work with them.
We wish them to succeed in the future as well as they did so far, and hopefully we will write another blog post, in a few years, or even quarters, about the largest software IPO ever for a French company!
This article was originally published on Medium.
