On a cool Monday afternoon last December in San Mateo, a bustling hub within California’s Silicon Valley, Glen Coates and Mike Elmgreen made their big pitch to the venture capitalists who could help make their tech startup a winner.
The young Australian expats had been rehearsing in their nearby hotel room for the past week for this meeting.
Their startup, called Handshake, offers an online app for roving sales reps that lets them punch in wholesale orders on their tablet or smartphone rather than scribbling on a paper pad.
It had attracted interest from Emergence Capital Partners – a venture firm that specialises in companies with cloud-based software services and whose success stories include Salesforce.com and Yammer.
Now it was time to convince the firm’s 13 partners and advisers their startup was worth an $8.7 million cash investment.
“Stumbling in front of any of these guys would have spiked the deal,” said Mr Coates, 32, who lives in New York in the same hip Brooklyn neighbourhood as Mr Elmgreen, 30.
Inside a fishbowl-style boardroom with tall windows down one side, the former Sydney Grammar classmates covered the usual territory – company vision, market size, sales strategy – and then offered a tongue-in-cheek demo of their app that conjured a make-believe wholesale order store for Silicon Valley venture capitalists, filled with the things they are known to prize: Tesla electric sports cars, gold Rolex watches and polar fleece jackets.
But the breakthrough came when one of the general partners, an outdoors enthusiast, asked how many of the products on the shelves of REI stores (well-known in the US as an outdoor recreation retail chain) could be sold on Handshake.
“Well, all of them,” replied Mr Coates.
That seemed a pretty good signal as to the startup’s market potential. The room was won over.
Handshake has handled more than one million wholesale transactions, valued at nearly $10 billion, since launching the app in late 2010, said Mr Coates.
The company makes money from the thousands of users who pay a subscription fee for its services, with customers ranging from baby stroller brands to candle makers, hearing aid manufacturers and kitchen goods retailers.
Mr Coates, the chief executive officer, and Mr Elmgreen, chief revenue officer, manage a team of engineers, sales staff and customer support staff from their headquarters in Manhattan – an 1200-square-metre, loft-style office space on the ninth floor of a former industrial building outside of SoHo.
The idea behind Handshake was born out of the frustrations of Mr Coates while attending a trade show in New York in 2010.
He had moved to the US to run the wholesale operations of an Australian friend’s retail company and was bewildered at the way sales reps relied on pen and paper to write down orders.
So the computer science graduate used his spare time to design software that would solve this problem, and unveiled a beta version of Handshake in Apple’s app store later that same year.
But Mr Coates did not anticipate his pet project would gain the momentum that it did.
A crossroads moment came at the start of 2011 while he sat in a lecture hall at Columbia University’s prestigious business school in upper Manhattan, where he had enrolled in an MBA program.
It was the first day of orientation week and while other students had eyes glued to the lettered speakers, Mr Coates had his head down answering a steady stream of support emails from his first customers.
It was clear where he wanted to devote his time. The next morning, Mr Coates walked into the dean’s office and dropped out.
“I’ll never forgive myself if I don’t give this a shot,” he told the dean about his nascent business.
Mr Coates then used his refunded tuition fees and personal savings to work on developing his app. In mid-2011, he began charging money for it and the first revenues started coming in. He then persuaded Mr Elmgreen, who was working in New York as a sales executive for Microsoft, to quit his job and help run sales and marketing.
The pair was soon earning enough cash to make their first staff hires – but not fast enough to expand the business and develop their product at a pace that would keep them ahead of the competition.
They turned to venture capital and by late 2012 secured $1.6 million (AUD) in seed funding from a handful of firms.
The $8.7 million from Emergence Capital – their latest round of funding – was announced on Monday.
Kevin Spain, a general partner with Emergence who will now take a seat on Handshake’s board of directors, said his firm considers about 1000 companies each year but typically only invests in about five.
He said they picked Handshake because they felt the company were leaders in a big market and were impressed with how far the two Australian entrepreneurs had come in winning “lots of happy customers with a quality product”.
Mr Coates said the fresh injection of capital will help Handshake broaden the scope of their cloud-based software services into other facets of wholesale ordering, such as when a store owner sells out of stock for some product and needs to get more.
“That store owner should be able to enjoy the same great user experience as consumers do when they go to online shopping sites like Amazon,” he said.