[published on LinkedIn]
I read this resume once that said, “Dan Bickmore knows the three keys to success… hard work, hard work, and hard work!” It’s been 25 years and I still remember that guy’s name! In my world, the three keys to success are competence, work ethic, and integrity. These are things that you can control. But there’s a forth key, a hidden key if you will, that you cannot control and that’s the stars.
As an entrepreneur or founder or CEO, your job is to keep the stars aligned. If they shift, you pivot.
There was no bigger pivot than with my second company.
When Sun Microsystems announced Java, we were one of five companies competing in the cross-platform user interface toolkit space. Overnight, our new customer sales disappeared. It didn’t matter that Java wasn’t yet available. It didn’t matter that when it was released, not all of its features worked. It didn’t matter that its feature set and platform support were limited.
As far as I know, we were the only ones to make it out alive.
What did we do? We knew that we would never rise above the noise that Java was generating so we immediately killed all of our advertising. We also knew that our existing customers were the only ones who would understand what we had to offer so we began to market whatever we could to these customers (e.g., additional developer seats, priority support, software maintenance, training & consulting). This was a shift from the traditional product model with paid updates/upgrades but it provided sufficient revenue to keep the team together and the doors open.
We continued doing this for months on end; all-the-while I kept searching for a long-term solution (i.e., just getting by wouldn’t last forever). Then one day, a customer called and asked if we had plans to migrate our toolkit to the embedded space. He told me that they had already ported our code to a popular embedded OS and he was more than happy to provide it to us (i.e., obviously he understood that each time we’d release an update, his team would have to migrate our changes to their version).
During this conversation, a light switched on.
Here was a market that had no face (no UI tools) and was not price sensitive (developer tools were commonly priced in the thousands instead of the hundreds). To top it all off, embedded OS vendors were having to contend with Microsoft and its scaled-down version of windows called Windows CE (obviously, an OS with a graphical face). As usual, Microsoft was doing its best to obfuscate things through advertising, PR, and industry events.
If we could migrate our technology to the top embedded OS platforms, we might conceivably breath new life into our struggling little company.
I sat down with our development team and found out exactly what it would take to port our code to an embedded platform with all hands on deck. Their estimate?… two weeks. This was no shock to me because in my experience, developers always respond in units of two… two hours, two days, two weeks, two months. (I was glad that they didn’t say two months.)
Unfortunately, we didn’t have the capital to afford the development tools or the time required to port to each embedded OS platform. Nor, did we have the capital to launch our product into a new market. Things were really tight but maybe we could get the embedded OS vendors to help us. I learned long ago that it never hurts to ask.
I thought the best place to start would be with the company that our customer had supported so I asked our customer if he would go with me to visit their embedded OS provider (#2 in the space at that time). A few days later we had a meeting scheduled.
The day before our meeting, I got a call back from a publisher friend who produced a number of software development magazines, including one for the embedded systems market. I told him I would be meeting with the #2 company the next day and wondered if he could liaise me to someone at the #1 company to “try and kill two birds with one stone.” He told me he was a good friend of the founder and that he would ask him to call me. He also counseled me that I should be ready with a 30-second pitch.
I promise you won’t be sorry…
Just as he predicted, that afternoon the founder of the #1 company in the embedded space called me (from the lobby of a hotel where he had just finished speaking). During this very brief conversation, I told him, “I know it’s last minute but if you can take a meeting tomorrow afternoon, I promise you won’t be sorry.” He asked for our website address and then said to expect a call either way from his assistant. An hour later I learned that I had been allotted 30 minutes for the following day.
My first presentation with the #2 company went very well.
Our customer demonstrated their application (software that monitored and configured a heart pacemaker, before and after being implanted). It was really cool. What was also cool, literally, was the reception we were given by this company’s VP of Development and his team. Here I was showing them a UI toolkit that when combined with their operating system would be a killer offering against Microsoft. For some reason, this man didn’t see Windows CE as competition. How in the world did he rise to that rank and lack such vision, I wondered.
I left hoping that my next meeting would be better.
I arrived at the #1 company a few minutes early and was ushered to a conference room where I could set up. The founder and VP of development showed up on time but it was 10 minutes into my 30 minute allotment when I finally got a monitor that would connect to my laptop. I cut to the chase and demonstrated our toolkit by showing them our interactive UI builder. Since the builder was written using the underlying toolkit, it could be created as a native app on any supported platform. When my 30 minutes had passed, I started to button things up but the founder interrupted me saying, “You don’t have to leave right away. Can you give me just a moment?” He went over to the phone and told his assistant, “please cancel the rest of my day.”
He came back to the table and said, “Exactly what can we do to help you?” “You mean if I could wave my magic wand?” I asked. “Yes” was his response. So I told him that they could help in three ways:
- they could provide the development tools we needed to port our code to their platform,
- they could help us fund the development (not a margined cost, mind you, but our actual out-of-pocket expenses), and
- they could liaise us to their customers.
I thought my ask was pretty aggressive but I really had no choice if we were going to support their platform.
He responded, “We can do 1 and 3 and some or all of 2 depending on the cost.” I told him it would take $20k and approx. 2 weeks. He smiled and said, “Just a minute.” Then he went over to the phone again and told his assistant he wanted a check for $20k made out to… “what was the name of your company again?” he asked. We waited a bit and his assistant came in with the check. I thanked them and said I’d come back when we had migrated our code to their platform.
It’s all on you guys now…
With this new opportunity in hand, I returned to the office and again sat down with our development team. Like always, they rose to the occasion. No more than one week later, I was back at the #1 company (this time, the marketing VP was also present). Once again I showed them our interactive UI builder. However, this time when I exited the application, they could see that it had been running on their embedded operating system (all-the-while they thought it was running on Windows). They were stunned. “Can you do that again?” the founder asked. “Sure!” I said. “Wait just a moment, I want to get a few people to see this.”
Within minutes the conference room was filled. I had already loaded the interactive UI builder (just like I had done before). When I exited again and they could see that the program was running on their platform, it was smiles and high-fives all around.
The founder then invited everyone to go back to work and our discussion turned to how they might liaise us to their customers. I suggested we demonstrate the product in their booth at the upcoming embedded systems trade show. I told them that we would be doing the same with the #2 company. You remember that the #2 company had originally declined to work with us but as soon as they found out that the #1 company had agreed to cover our development costs, they asked if they could do the same and sent a check… I wonder who told them? 😀
Here’s where things took a turn for the worse.
The marketing VP stood up and blurted out, “we’re not going to be a ****ing me too company” and walked out of the room. The development VP excused himself and I could hear them outside the room arguing back and forth (more colorful language ensued).
When the development VP returned, he apologized for his co-worker. “If I were you, I would do the same,” he said. “We haven’t given you any incentive to exhibit with us exclusively so let me tell you what we’re willing to do. If you go with only us for this first show, we’ll make a big deal about you. We’ll give you a prime location in our booth, we’ll print a flyer that will be included in the packet for each attendee, and we’ll take you to all of our press briefings and give you the last 5 minutes. Otherwise, you’re welcome to be in our booth as one of our regular 3rd-party vendors.”
I was torn. I new theirs was the much better offer but I also knew that I had already committed to exhibit with the #2 company. My response was that I’d get back to them in a day or two. The next day, I called the #2 company and before I could even ask how things were going, they told me that there had been a mix-up with the number of demo stations in their booth and that they would NOT be able to accommodate us at the show. “That’s too bad,” I said. As soon as I got off the phone, I called the #1 company and told them we would take their deal.
“How much attitude can we have with this flyer that goes in the attendee packet?”
“What do you mean?” he replied. I explained that as a small company, when we went to a trade show, we went to OWN it. He said if our flyer design was too aggressive or controversial, he’d have to run it by their CEO. I couldn’t see any downside for them. If the flyer worked, both companies would benefit. If it didn’t, we would take the blame (i.e., as just a 3rd-party vendor in their booth).
Not From Microsoft…
Over the next few days, I came up with a number of marketing concepts (my 8′ white board was filled) but my favorite by far was the “NOT FROM MICROSOFT!” campaign. Microsoft was viewed by many as a bully — frequently buying their way into new markets (e.g., they were new to the embedded industry but had the largest booth). The idea behind this campaign was to play off whatever animosity existed between the embedded industry and Microsoft.
The flyer design was simple, “What’s the latest and greatest thing for the embedded market? Hint, it’s NOT FROM MICROSOFT!” The tag line was in the shape of a button where a real button would be attached.
So, armed with this campaign, we went to a show where no one had ever heard of us.
Before the show opened, I ran around handing out buttons to all of the exhibitors (which they kindly accepted). When the show opened, all of the attendees poured in wearing our button.
A few hours later, I happened by the Microsoft booth carrying several of our buttons. Their booth manager jumped into the aisle and demanded to know, “where did you get those buttons?” I told him that I made them. He expressed his displeasure saying it wasn’t professional (a subjective statement to be sure). Obviously, it poked fun at them. Then he went on to say, “It’s not funny!” Here, I took exception. “Sure it is!” I said. “I’ll bet if we ask 50 people walking by they would all say it’s funny.”
By then, a reasonable crowd had assembled around us and this guy from Microsoft continued his verbal attack. That being said, he obviously didn’t grow up in a family with 5 outgoing boys because each time he said something, I nailed him to the wall. Laughter was everywhere. Finally, he threatened legal action so I told him that if he was truly concerned, he should write a letter to his congressman and I walked away. Boy, that was fun!
On the way back to our demo station, I walked by the #2 company’s booth (you remember, they opted not to have us exhibit with them) and their development VP congratulated me on our marketing campaign. “Those buttons are everywhere” he said. Then he invited me to meet their President and their sales & marketing VP. We shook hands and then sat down around a small table and started to talk; about nothing really.
Then (and I could never have orchestrated this), the founder and development VP of the #1 company walk by and see me meeting with executives of their chief rival (they later acquired the #2 company and were themselves later acquired by Intel).
You can imagine what they were thinking… “they’re trying to steal them away!”
As the first day of the show came to a close, the development VP from the #1 company asked if I had dinner plans. (Being new to the show and not knowing anyone, I didn’t have plans for anything.) So we met up for dinner. Things were quite normal until he asked, “What do you think you’ll do after all this?” and I’m thinking, “after all what?!” He went on to say, “I mean, what’s your exit strategy?” I said, “At some point, we’ll most likely be acquired.”
Then he said, “That may happen sooner rather than later.” “What do you mean?” I asked. “Well, I’ve been authorized to offer you [insert big number here] for your company.” With a straight face I responded, “WHAT!?” Thinking it wasn’t enough he says, “OK, what about [big number plus more]. At this point, I said “Where are you getting this number?” His response was that it was based on our user base of X and monthly new users of Y to which I said, “I know those numbers and you’re a little shy.” He gets out his calculator, starts punching buttons, and then says, “Well, that’s more than I’m authorized to go. How about [bigger number plus even more]?” I said, “OK.”
I warned the development VP, “You realize you’re buying an intellectual property and not a bunch of hard assets. Our technology is great and it’s an original work of authorship without liens, encumbrances, known infringements, etc. but we don’t have a bunch of cash or receivables or fancy equipment or offices.” His response was, “Yes, we imagine that things are difficult right now but we also believe you’ll do very well in our market and we’d like to make you this offer before you get too expensive.”
And there you have it, I had agreed to a price. He explained that the deal would be a stock swap (private for public) — priced at $40 per share (a 10% discount from where it was trading) — and that we’d be able to sell our shares at the end of the calendar quarter following the acquisition.
I had a friend that did a deal like that and the stock price of the acquiring entity went down significantly before he could sell his shares so I asked, “What happens if the stock goes down before we can sell our shares?” citing the example of my friend. After a bit of discussion, his response was that if the stock price dipped more than 20% while our shares were locked, they would kick in 20% more shares. That was more than enough for me.
We signed the deal and the very day before we could sell our shares, the stock price dipped to $31.875 per share (exactly what was needed to get 20% more shares!). The week or so following the dip, the stock price soared to $54. How much control did we have over any of that? Since everyone at the company was incented with ownership (it was one of the ways we kept the team together when things went sideways), we all shared in this uptick.
- Control what you can control. I can see how each key (i.e., competence, work ethic, integrity, and the stars) played a key role in our exit (pun intended). The first three keys were demonstrated by our team time and time again; especially when things were at their darkest. No one gave up.
- Keep your head up and your eyes open. The last key, alignment of the stars, was taking steps every day even when we couldn’t see light or the end of the tunnel. Otherwise, we would never have recognized the embedded OS platform as an opportunity for us. Of course, the overwhelming success of the “Not From Microsoft” campaign and being seen with executives of a rival company didn’t hurt (we’ll call those our “lucky” stars).
My sincere thanks goes to Microsoft for being an easy target to tease and to my 4 brothers who taught me to keep a straight face and fire right back.
As a side note…
While you’re scaling that mountain, make sure that if you fall, it doesn’t take you (and your family) down. Build up and set aside 6-months cash as a personal emergency fund. And, don’t be tempted to use this for business.
Movie Quote: “All I’ve ever wanted was an honest week’s pay for an honest day’s work.” — Sgt. Bilko (1996)