How a $125M Bet Proved Accountants are Innovators

Accountants often struggle to be innovative. Some CFOs instinctively discourage it. They’re a conservative bunch, with good reason: accuracy and reliability is what’s needed from the finance team, and change is treated with deep suspicion. But accountancy drove arguably the biggest change in business operations this century: the move to cloud-based platforms and the corresponding rise in efficiency, evolution and even remote working. And it started with a five-minute phone call. 

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The scene: San Francisco, 1998, as the web 1.0 boom was approaching its peak and the first cracks were starting to appear in some young, lavishly-funded but still unsuccessful businesses. One such was mBed, which had been started by Evan Goldberg with the money he’d made working as a developer at database giant Oracle. mBed enabled the then-advanced technology of animations embedded on webpages. It was competing with Macromedia Flash - later to become part of the Adobe behemoth - and losing. Goldberg “could see the writing on the wall,” he recalled on the Thirty Minute Mentors podcast. 

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In the process, he’d learned something: he was interested in business software, and the business software available to startups like his was terrible. Payroll wasn’t connected to accounts, there was no central customer list, getting visibility on things was consistently painful. He saw an opportunity. And then Oracle founder Larry Ellison, who’d hired Goldberg at Oracle and invested in mBed, called. 

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“He said, “How's your graphics stuff?” said Goldberg. “I said, ‘Ah, not great. Flash is Macromedia and it is sort of eating our lunch. I have this new idea. I want to do business software’. And he said, ‘Okay, well, if you're going to do that, you need to start with accounting. And you need to do it on the web’”.

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This was a surprising statement from Ellison, because his vast fortune was built on exactly the opposite. Oracle’s signature Database product ran on mainframe servers, and it owed its vast revenues to selling both to large corporations at premium prices. To say the future lay elsewhere was like Steve Jobs phoning up and saying the future was in pen and paper - and indeed, Steve Jobs was one of many who doubted the vision, as Goldberg discovered when he bumped into him at a party. “Oh, Larry's really excited about this accounting thing on the web,” he remembers Jobs saying, “but do people want to do accounting and business in a browser?" "I'm not sure, but Larry seems to think so," Goldberg replied. 

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Ellison’s conviction was born of experience: customers hated the cost and the complication of maintaining and updating their own software and hardware. Host it on the new World Wide Web and that requirement went away. In the first minute of the call he claimed that this would be the way that software would be delivered for the “next 1,000 years”. He was equally certain that accountancy was the tool to build first, rebuffing Goldberg’s original idea of focusing on CRM and competing with industry leader Siebel. “Larry said ‘you have to build the back office first, the accounting system and the ERP system, and then you build the other systems around it,’” former Netsuite CEO Zach Nelson would later recall. Goldberg, who professed to be more interested in accountancy anyway, readily agreed. 

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That first five-minute phone call put things in motion. Goldberg agreed to launch a company to deliver web-based accountancy software, called NetLedger. He’d lost most of his money on mBed, but put $2,000 of what remained into the new enterprise. Ellison could make a much bigger bet: he put down a hefty $124M in exchange for a chunk of the business. The world’s first cloud computing platform was born, eight years before the term “cloud computing” entered common usage.

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NetLedger started small: its first release was for companies with less than 100 employees, and cost $4.95 a month. The customer demand was there from day one, and Goldberg’s team quickly mastered the challenges and opportunities of the web-based approach: updates to live systems on which multiple companies dependent were nerve-wracking, multi-hour affairs, but they enabled new features to roll out a lot faster than Oracle’s old mainframe systems could manage. They blazed a trail  that Workiro - which launched the same year - would soon follow, and only just ahead of fellow Oracle alumnus Marc Benioff, who launched Salesforce mere months later.

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Goldberg’s sales pitch gradually won over the initial suspicion of the eternally conservative CFOs, and once they were on-side the platform expanded. In 2001 NetLedger took its first steps beyond accountancy with NetLedger 1 System, which included CRM and ERP, and in 2003 it rebranded as NetSuite to reflect the fact it offered tools to manage the full scope of modern business. In 2007 it went public and in 2016 it was acquired by Oracle, reuniting the business with the man who’d done so much to build it - and never relinquishing the accountancy expertise on which the company was built.

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Nurtured from within Oracle, NetSuite has grown from strength to strength. It supports, and is supported by, diverse businesses the world over, all of which are celebrated at its annual SuiteWorld event in Last Vegas.

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