Scott McCausland was an experienced software sales leader who decided to go out on his own in 2008 to build a new software business. His technical cofounder built the first version of their new software and Scott started selling it. MVP Systems Software was underway without any outside funding.
They kept adding name-brand customers who used their JAMS workload automation and scheduling software in their IT departments for a variety of scheduling and automation tasks that saved time and money. It was an unsexy but mission-critical software for their users. Their software grew more powerful and useful and they steadily added sales, development, and support staff.
The company grew to over $10 million in annual revenues with 70 employees in 4 global offices before being acquired in 2018 by Fortra (formerly Help Systems. Scott left Fortra in early 2020 and is now working on his next software company.
Best quote from Scott:
I am a big believer in executing—whether it’s development, support, or sales—by creating processes that are documented.
Because if they’re documented, you can scale it and the founder doesn’t have to be involved in every deal or decision.
When the CEO has 90% of the knowledge in his head, acquirers can’t buy the company because they’d have to basically rebuild it from scratch.
I was very proud of the fact that when I decided to leave after our acquisition, my team didn’t miss a beat
Read the interview transcript here
Edited transcript of Practical Founders Podcast interview with Scott McCausland, founder and former CEO of MVP Systems Software.
Greg Head: And we’re live with Scott McCausland, the former CEO and founder of MVP Systems Software. Welcome to the Practical Founders Podcast, Scott.
Scott McCausland: Thank you, Greg. Good to be here.
Greg: Nice to see you. You’re in sunny Connecticut this wintertime of year.
Scott: Cold Connecticut.
Greg: So as a successful serial entrepreneur, I’m sure there are a few reasons why you’re still there, but we’ll get into all of that. You founded, grew and sold the MVP Systems software business, and we’ll just start with the end. How big was it when you sold the company to HelpSystems, now called Fortra, in 2018?
Scott: We had about 70 people spread across four offices. We had two offices here in the U.S. We had an office in the UK and an office in Australia. And revenue-wise, we were doing more than $10 million a year.
Greg: So you got this thing up and running with no outside funding. Scott, what is MVP Systems software? I know you had your JAMS software product, so it’s one of those where the name of the company and the product are different. But what was JAMS?
Scott: So JAMS was an acronym for Job Access and Management System, which is in a nutshell, a batch job scheduling tool. So workload automation, any sort of IT department would need a product like JAMS to help run their internal processes. The great thing about what we sold is you could sell it to anybody. So we were selling it to Fortune 500 accounts, we were selling it to small businesses, we were selling it to colleges and universities. People would say, “Who’s your target audience?” And I’d say, “Anybody who’s got $25,000 or $50,000 bucks in his wallet.”
Greg: Well, there’s a sales guy. I know you have some sales DNA, so we’ll get into that as well. So IT departments in up and running companies, they have data and processes and things that just need to happen. And if they’re manually clicking on it and doing it themselves, that just takes a lot of time, and you create this kind of framework for moving data and converting things and starting processes and all that kind of stuff, that in one pane of glass, as IT people like to say, it runs. You can automate a lot of stuff and save time.
Scott: That was a great description. So yeah, it’s an automation engine and how our customers used it varied greatly. We had some customers, you know, a college would use it to process financial aid applications. Banks would use it for reconciliation processing. Credit unions would use it to run what they would call good night processes and everybody in between. So one of the hardest things about selling the solution was it could do such a wide range of things that it was hard to find the right person to go after.
Greg: I mean, you grew a sizable business and you did it not in the modern SaaS, AWS, DevOps, right, the cloud. Take us back to the beginning, Scott. I know you have a sales-type background here, but how did you get into this unsexy business of IT automation tools?
Scott: Yeah, so that goes back with aging myself back to the 1990s. So I joined a partner in 1991 who was starting an OpenVMS software company. We were selling file compression utilities, and debugging tools, and that company was very similar where I was a minority shareholder in it. Again, just two of us owned the company, but we grew that company to about $23 Million over 17 years. So it took some time. In 2007, I sold my stake in that company.
Greg: Was that a big price or that kind of thing?
Scott: It was a nice outcome. It was a nice outcome. But I was way too young to just kind of sit back and do nothing. I was only in my mid-thirties. I was approached by a developer who wanted to bring a job scheduling tool to market. He had the backbone built and needed somebody like me who could push it out the door.
Greg: So you were the VP of Sales at this previous company, or what was your role?
Scott: COO, technically. But I ran the sales teams as well. And that company, we had about 130 people. We made the transition in that first company from OpenVMS to Windows at the right time, and that’s when the company took off. But in 2007, I was ready for a new challenge. I’d been there 17 years at the only job I had out of college, and so sold. And about a year later, my partner in crime approached me and said, “Hey, I’ve got an idea here that I think we can make money on.” And I said, “Let’s give it a go.”
Greg: So that was like the technical founder finds the sales founder.
Scott: Exactly. It’s job scheduling. And so you talked about the early days going back to the mainframes and legacy systems. Job scheduling has been around since the beginning of time. So, I had reluctance because I was saying to myself, “Who in the right mind is buying a job scheduling tool in 2008, 2009?” But then we started the company, I put a little bit of my own money into marketing, and before you knew it, the phone’s ringing and you realize that, “Hey, listen, there’s still a market out there for this sort of thing.” And I had known him for 15 years.
Greg: And how long between when he said, “Hey, I’ve got this product I’m working on and let’s go do something and you can sell it.” How long before you had a customer in revenue and you said, “Oh, there’s something here.”
Scott: From spending 17 years selling into IT, I had a lot of contacts, right? So I was able to drop this product into a number of former customers of mine. Immediately, two of them came back to me and said like, “Fantastic product, maybe you need to add X, Y and Z, but where do we buy it?” Within months I knew like, okay, there’s a business here.
Greg: So this was before the cloud, this was Windows servers and things like that, and back end, or were there lots of multiple legacy systems that had to go translate?
Scott: No, this was purely Windows play. And then over time though, as we grew, we started getting into various applications and different platforms as well, so that what we had in 2008, 2009 looked nothing like what we had in 2012, 2013 because we were growing, we were adding people, adding more developers, talking to more prospects and customers who said, “Hey, can you do this on an AS/400? Can you do this for Ellucian Banner? Can you do this for Scimitar?” And so, we started just expanding the platform and also the price. When we first got into it, we were selling it for a fraction of what we were selling it four or five years later.
Greg: Yeah. And what was the price point when you started, and then five years later? Was this big software or small software pricing?
Scott: Were selling it for $700, $800 a license. And then if you spun the clock forward, those same licenses we were selling for $10,000 to $25,000 each.
Greg: When we say license, that’s a little bit of old software speak. It’s not monthly, it’s not per year or per month. Was that a sell-once license, then a little maintenance contract?
Scott: Capital expenditure, and then we would sell support on top of that starting in the second year. One thing we did was even when it was just two of us, we offered 24/7 tech support. We just realized that okay, every now and then we may have to get out of bed at two in the morning because the nature of what we were selling, many of our customers were running processes at night when those servers are available and resources are available, but it was a great selling point. And then four or five years into it, even though we were still delivering it as an on-premise solution, we started rolling it into more of a, “Hey, you can pay us $1,000 a month or $3,000 a month.” Same products, the same technical abilities, but it was the mindset that was changing. People were willing to say, “Instead of paying $50,000 bucks up front, we can pay $25,000 a year.”
Greg: The buyers on the other side, it’s a lower number, right, for their budgets, $25,000 versus $50,000. But if you get them for ten years, that’s $250,000 as opposed to the one-time chart.
Scott: Well, yeah, the smaller entry point obviously opened up a number of accounts that we were selling for even $4,000 or $5,000 annually. Hey, if I could add five or ten new customers a month at that low entry point and they’re not costing me, salespeople, commissions and salespeople’s time, all of a sudden I’m adding $40,000 or $50,000 a month in revenue, and it’s real money, right? It’s real money. And I could pay a lot of bills with that $50,000 a month.
Greg: So you had some smaller deals that you didn’t even really need to talk to that just added up. Was most of your business kind of in the middle-sized deals where it’s a little sales conversation and occasionally had some very big deals?
Scott: Exactly, yes. So we had a couple of customers that were paying us $400,000, $500,000 a year. A couple of those, the monsters. Our typical customers were paying $25,000 to $50,000. That was our sweet spot because we knew that if we started getting more and more into the half-million dollar deals, we were going to run more and more into the competitors, Broadcom, and BMC. To be perfectly blunt, they didn’t care if we were getting the $25 or $50K deals. They did care if we were going after the $500,000 deals. And it’s tough to compete when you have 70 people and they’ve got 70,000 people.
Greg: Could you compete by going after different customers? You went after the smaller ones generally. Did your product have something, a unique angle in the marketplace?
Scott: We did very well if it was a Windows-centric customer because we had a .NET API so they could bake our capabilities into their own applications. We also had a sweet price point. We could sell an enterprise customer like Bank of America, but we would sell them on a department or division basis. Like, I’d have a salesperson come to my office saying, “Hey, I’m going to try to do this global deal with JP Morgan,” and I’d shake my head saying, “This is never going to happen.” But if we could say, “Hey, the credit group at this specific company has a specific need,” we could sell them for $70,000 and use that as our point of attack to go after the other division. Because as a small company, we’d often say, “You’ve never heard of MVP, but you’ve heard of our customers.” We were reference selling like crazy. That was one of the first things I told our new salespeople, like, “You have to learn about our customers across every industry. So if somebody says they’re in education, you can spit out ten colleges or universities that use our product. If they’re in finance, you can spit out four banks, three hedge funds and two VC firms that use our product.”
Scott: Our customers were our greatest selling point. They really were, because our customers loved us. I would have support people sit in on sales calls. I’d have developers sit in on sales calls. You want the people in the trenches and the support and developers writing the code to hear what the customers like, what they don’t like, what they want to see added, what they think is a waste of time. By having the developers interact directly with the customers, we were able to really drive the product forward and specifically on what we needed to do, not what we thought we needed.
Greg: So you didn’t raise outside funding, so was it profitable pretty quickly based on your selling and your relationships and getting it up and running quickly, or did it take a while?
Scott: Within 15 months we had done over a million in revenue. That’s when I started saying like, “Okay, I need to hire help now.” So I hired my first salesperson, I hired our first support engineer. The benefit I had is I had this network of people that had worked for me in my first company. And so the first four hires were all people that had worked for me in my previous company.
Greg: So not only your customers that you had relationships with, but talent that you could bring on to the next adventure.
Scott: Yeah. And it makes it really easy to open an office in the UK or in Australia. When I pick up the phone and say, “Hey, I’ve got a new company, do you want to come work for me? Same thing as last time. We’re just going to be attacking the market, flipping rocks.” And they’d say, “Absolutely, let’s do it.”
Greg: Wow. But they didn’t have stock options. This wasn’t, “We’re going to raise big funding and create a billion-dollar company.” Were the commissions and the bonuses and all of that enough for these talented employees?
Scott: John and I wanted to maintain control of the company and we knew that going about it our way was going to be the slow and steady path. It was not going to be the, “Hey, we’re going to quadruple revenues this year.” No, it was, we were growing by 30, 40, 50% a year. For the employees, it was making sure that you were paying them better than market rates. And so you’d look at it like what we would pay for commissions for our salespeople, and they’d be like, “Wow, great. Like, hold on, on a $50,000 a year, you’re willing to pay me 12% or 15% commissions and then bonuses on top of that.” Being a salesman at heart, I think one of the advantages that my employees had was I knew what a Herculean effort it took to sell, right? I know that flipping rocks and looking for opportunities is a complete pain in the rear end.
Greg: Finding your own customers as opposed to waiting for qualified leads to come through the funnel, yes.
Scott: Yeah. When I would interview people, I’d say like, “If you’re waiting for the phone to ring, this is not going to be the job for you.” Our phone just didn’t ring. We would get inbound traffic, but it was not enough to survive on. We built processes, both sales and marketing processes, to help combat that issue.
Greg: Sometimes a sales-oriented founder, who can get out there and sell the big deals and tell their cohort developer, “Go build this, I just sold it,” and they’re very intuitive and artful about it, they struggle when they get a salesperson and a sales team and kind of the factory side of sales. Did you struggle going from the CEO, lone salesperson, to a sales team?
Scott: Well, I’d say no, just because I had spent so many years myself in the trenches. Even in my first company, I was the only salesperson initially. So the key is building processes that can easily be embraced by people that don’t necessarily even have experience in IT. So my best salesperson, for example, was a former Army recruiter. I was looking at the attitude more than anything else, right? If they were aggressive, enthusiastic, hustling people, I could teach them the benefits of what we do and how to sell it and how to overcome objections and how we stack up with the competition. But that all has to be documented. And then by year three, I think it was, I had hired a marketing person. He showed how little I knew about marketing.
Scott: If I can find people smarter than me and I can just say, “Hey, go at it,” I’m all in favor of that. I don’t need to be looking over your shoulder every second of the day. I just want to say, “Hey, listen, we’re trying to get from A to Z. Here is our plan and our process to do that. Go get it.” But at the same time, if a salesperson said, “Hey, hop on this call with me,” or the marketing guy would come down the hall and say, “Hey, let’s chat about this. This is what I’m thinking,” I was all ears, and I’d gladly give my two cents. But especially in the early days, it was finding people with that right mentality, that, “Hey, we are the small guy in a huge market and we have to have these kinds of guerilla warfare tactics in order to survive and thrive.”
Scott: Hiring developers was easy because we could just qualify them technically. Finding, again, people with the right attitude was everything. Hiring good salespeople is always difficult, and I don’t care what anybody says, it’s probably the hardest position to fill in any company because any salesperson is going to come in the room and say, “I can cold call, I can hunt, I can walk through a wall for a nickel,” and then all of a sudden you get them in there and he or she is like a deer in the headlights, right? What I often looked at is what their past was like. What have they done? You know, bare knuckles sales. They don’t have a huge team around them, feeding them everything. Who’s setting up my appointments, and who’s getting me my leads? So I wouldn’t hire people from the larger organizations, to be perfectly honest. Like if they came from an IBM or an HP, there was a good chance they couldn’t survive or thrive in a company like ours that was small, dynamic, aggressive. And you as a salesperson, for example, had to do everything from cold call to close.
Greg: Yeah, maybe a little after-sales support, and account management.
Scott: We were so small we didn’t really have a customer success team. We had one person who did that, but I paid the salespeople on… Any additional revenue that came out of that account, the salesperson got commission on. We added quite a few capabilities that customers love. So we’d have customers call us almost daily saying, “Hey, we need to add five more licenses. We need ten more agents.” So the salesperson’s involvement was writing up a quote for $25,000 bucks, and sending it out. The customer sends us back a PO. In many companies, they don’t pay the salespeople on those deals or they pay them a reduced commission. I paid them the same amount as they would have gotten on the initial deal. And even on the renewals, I paid the salesperson a commission.
Scott: So the salespeople had a vested interest in making sure that their customers were happy. They couldn’t just sell and forget. They had to constantly go back. The salespeople also had to review support tickets because we wanted to make sure that, hey, if there were outstanding issues, the salespeople were also partially responsible for following up on those. But also, if we had a customer who all of a sudden was like, “Oh my God, you guys are the best. You’re wonderful,” that was a time when marketing would then follow up with them saying, “Hey, can we get a testimonial? Can we do a case study? Would you put a review out on G2?” All of your departments have to work very tightly and integrated with one another because we all have that end goal of we want a super happy customer because super happy customers tell their buddies about it and they buy more.
Greg: Your previous company was in the same space and grew steadily. What was the biggest difference between MVP Systems Software, the new company you created? What did you do differently that you didn’t do in the previous company?
Scott: Just a slow and steady growth. My first company, my partner wanted to grow rapidly and we were probably spending way more money than we had to or should have. This company, I was always like, “Okay, slow and steady wins the race.” I always made sure that we had a couple of million bucks sitting in the bank where, if things go sideways on us, I know I’m not going to have to can anybody, I know I’m not going to have to lay anybody off. I can survive for six months or a year without closing a single deal, if it comes to that. It never came to that, but I was much more conservative because you have these people who are leaning on you, right? You know you spend more time with these people than you do with your family. You’re in the office with these people from seven o’clock in the morning until six o’clock at night, and you realize like, hey, listen, they’re leaning on you, you’re leaning on them, and it’s this relationship that you don’t want to screw up.
Scott: It was just a much more conservative approach. And I probably could have grown faster, but it was one of those things. We were growing fine, every year was better than the last year, and it was a place where people enjoyed coming to the office. We had converted an old mill space into offices and it was a really cool space and everybody enjoyed it. And we’d do outings and this and that.
Greg: So the cloud was picking up in SaaS software and it was pre-COVID, so you actually had an office and people showed up there and all of that. And you had meetings.
Scott: I like the idea of everybody being in an office where I could walk down the hall and say, “Hey, what’s going on here?” Or more importantly, my door was always literally open and if my door was closed then somebody knew like, “Okay, he’s on a call, I shouldn’t bother him.” But if I got off the phone, I’d open my door because I’d wanted everybody to be able to come talk to me. It’s when things kind of are going sideways a bit you want people to realize that they can come talk to you so that they’re not sitting there stewing about it, and then all of a sudden you find out that they’re quitting, and it’s something that happened 60 days ago that you had no idea occurred.
Scott: We’d laugh about it, like, I’d do my usual rounds, right? Two or three times a day I’d walk through the trenches and just, “Hey, how’s it going? What’s going on? What’s slowing you down? What can I help with? What’s keeping you up at night?” It’s just keeping your finger on the pulse. And that’s easy to do when everybody’s in one office. And it’s harder to do nowadays, where all of a sudden, like, Greg’s sitting there, he may be stewing about an issue, but unless you open up a Zoom session with me, I have no idea. It’s much more difficult to get the temperature of what’s going on.
Greg: So it sounds a little bit like a straight line. We started this company, got customers, we added features, we added customers, we added salespeople, we added marketing. Was it a straight line to get to $10 million and beyond or were there are other crises or major inflection points?
Scott: There are always crises. There’s always something going on that’s going to keep you up at night. I’m my biggest critic. There’s always something I’m thinking I could be doing better or I did wrong. We could close nine deals. If we lost the 10th deal, that’s the one I’m sitting there stewing about, wondering what we did wrong, what we could have changed.
Scott: And then there’s always, you’re going to have a person that’s, “Hey, I’m taking another job,” or “Hey, we’re moving,” or “Hey, this or that.” And that’s always difficult because then backfilling positions, right? You’re kind of taking two steps back on where you hope to be if a good salesperson or a good engineer leaves. So there are always issues. There are always issues, but that’s just, I always say it’s the cost of doing business. What people don’t see is me sitting here at five thirty in the morning dealing with the guys in the UK, or me at ten o’clock at night helping the people in Australia close a deal or get through a technical issue. If you want to do this, that’s the cost of doing it. Being a CEO is not a 9-to-5 job. The benefit I always say is I have is that my first job was in a startup, so my family’s kind of grown up with this. My kids used to say, “The laptop is the fourth child. Everybody keep an eye on Dad’s laptop because if something happens to that, we’re in trouble.”
Greg: This was a ten-year journey, just over ten years between, “Let’s go do this,” with John, your technical co-founder and selling the company. What changed in that ten-year period? That’s a long time in techland.
Scott: The capabilities of the product expanded dramatically over time. We ended up going from just Windows to covering everything from Unix, Linux, AS/400s, to mainframes. Application-wise, we started with just SQL to all of a sudden handling every ERP system out there, SAP, Oracle, you name it.
Greg: To run a process inside of one of these software products.
Scott: Exactly. The company transforms also. Now we have a little bit more HR-related matters to deal with. Financially, the company was always in a great spot, so that really wasn’t a concern. But we also then, we expand what we offered our employees, where we offered much better health insurance, a much better 401K, a match, all that good stuff. So appreciating what the people are doing for us and making it worth their while to come in every day and do battle. And then it’s just you get to the point where all of a sudden, you’re not maybe a household name, but people know who you are. And so my phone now is ringing and you’re getting the calls from VCs and competitors saying, “Hey, we’d like to have a discussion with you.”
Greg: Well, let’s talk about that. Did you sell this because the time was right and the deal was right, or did you sell this because you said, “The market’s changing,” or “I don’t want to run a company with 200 employees.” How did that materialize for you?
Scott: Probably in 2015, we started getting phone calls. “Hey, are you open to an outside investment,” or “Are you open to M&A?” My comeback would be like, “Okay, if you gave me $5 million bucks, I don’t think I would change our trajectory any differently.” We had plenty of money. If we wanted to hire two more people today, we could do that on our own.
Greg: So no thanks.
Scott: Yeah. So no thanks. But you’d start getting phone calls though, that were, “Hey, let’s talk about this,” and we’d have to open up the kimono. “Hey, here’s what we’re doing in terms of revenue. Here’s where we’re at.” And you’re starting to get a feel for what the market will pay. HelpSystems, they had approached us in 2015, initially, and it was kind of one of these hey, we had some meetings, but it was thanks but no thanks, we’re going to keep going on our own. And John and I would have these discussions every six months, “Hey, what do you want to do?” And John’s a little bit older than I am and he had never had an outcome or an exit. John was always deferring to me, but I always didn’t think that was fair because I said like, “I don’t need to sell it. I could keep going what we’re doing. I’m enjoying this.” We had a couple of other vendors come back to us and the money was now at a different level. And so I said to John, “I own most of the company, but what would you do in an ideal world? Would this be game-changing for you if you could walk away with X amount of bucks?” And he said, “Absolutely.” And so we started heading down that path.
Scott: So by early 2018, we started really getting into it with HelpSystems in terms of really doing due diligence-type work. I liked the company, I liked the CEO. I mean, they were good people and they had a competitive solution too. And so I think we slotted in nicely with their overall product line and where we would fit into their company. And then yeah, by the end of 2018, November 2018, we struck a deal and we signed the papers.
Greg: So you didn’t have bankers that helped you and shopped it to all the companies that buy IT-type software?
Scott: We had a deal with a banker for a few months, but it was quickly determined he had no idea about us.
Greg: Your industry, what you could sell and all the details?
Scott: Yeah. If you don’t know workload automation and who we sell to, to be perfectly blunt, he was making half-assed pitches to other vendors and probably doing us a disservice. So we canned that and just went on our own. So I was the chief banker on our side.
Greg: So it was really a CEO-to-CEO discussion.
Scott: I dealt with their CEO, dealt with their M&A person at the time who was a great guy. Having gone through the process before, I was prepared for it. I think many founders probably struggle with your business being reduced to an Excel spreadsheet, because it’s your baby, right? You’ve created this thing, it’s wonderful. You think it’s the best thing since sliced bread, and it’s the equivalent of like somebody calling your kid ugly, right? You take it personally. And you can’t, you can’t. Like, they’re doing their homework and they’ve got to check 8,000 boxes. And you just need to be prepared to answer very difficult questions. They’re not going to ask you about the 25 accounts that renewed and paid all this money, they’re going to ask you about the two accounts that didn’t renew, why they didn’t renew, what went wrong, and things like that.
Greg: So this wasn’t just a financial sale to a private equity group or something that was just a multiple of the profits you were running, this was a strategic sale to a company that sold to the same customers and they could imagine selling a lot more of this than you could, right? It’ll be inside our engine, it’ll be a much bigger product line, strategic sale. And you are almost a $15 million dollar company. Do you feel like you got strategic multiples of revenue?
Scott: I mean, I was very happy with the outcome. And you’re absolutely spot on. You know, they had a big office in Spain. We couldn’t sell into southern Europe. We didn’t have Italian-speaking or Spanish-speaking salespeople. They had people scattered across Europe. They had people in the APAC region. We had an office in Australia and 90% of our business was in Australia. We had a few customers in, like, Singapore. So I saw the ability or the vision of, hey, these people could take our product and sell it literally across the globe. And their customers tended to be bigger. So almost immediately, many of their customers were coming to us saying, or salespeople in other business units coming to us saying, “Hey, these people are interested in JAMS. It’s got a $250,000, $500,000 potential.” And those were deals that we never would have found. They’re in Barcelona or in Milan. So there were definitely advantages to being part of a larger organization. We were acquired, and I ran their workload automation business. And we continued to grow. So we didn’t miss a beat that first year in 2019.
Greg: So I’ve done this before, sell a company and then lead it inside the company to connect it into the new systems and take advantage of all those opportunities that everybody said was the big deal. Was it fun to plug it into a new organization and do you feel like you were able to take advantage of those big opportunities? You talked about the new regions and other kind of cross-selling. Was it a good home for your team and your product?
Scott: It was definitely a good home, a good fit. The biggest thing is you just have to get used to the fact that now instead of 70 people, we’re part of a company that’s got 1,400 people. HelpSystems has been rebranded as Fortra, now they have, I think, 3,000 people. So you just realize that instead of being on a speedboat, now I’m on a cruise ship, right? It’s not going to turn as fast. And so there were certain things that they kind of had to rein in on us, that were like, “Yeah, you can’t do that anymore. You’ve got to kind of follow our overall playbook.” And that was difficult. That’s difficult when you’re used to kind of running a Wild West-type environment where we’re just so focused on doing deals that we’re making the deals up as we go. And they’re all sudden like, “Wait a minute. You can’t just be changing terms and conditions.” You know, I acted as my own lawyer. I went to school as government law, so I figured, “Hey, what the hell, I’m qualified to review a 45-page terms and conditions document from a big bank.” Whereas now it was like, “No, that’s actually got to go to our legal department, and that’s going to take a few days.” And so all of a sudden, we’re sitting here like, “Wait a minute. Scott used to approve that in an hour.”
Greg: Yes, I totally get it. So, Scott, how long did it take for you to say the product and the team and the companies found a good home and I’ve done my duty and it’s time for me to go back to my entrepreneurial roots? Which is very typical, very normal, like I’m sure they planned on it at some point.
Scott: So I stayed for a year. In November, and December of 2019, you start having discussions about the 2020 plan. And my response to that was, “Yeah, well, my 2020 plan is not to be here.” And it’s the funny thing, it’s like you see in comedy shows about the breakup, right? It’s not you, it’s me. Well, that was true. Like, it wasn’t them. They were good, great people, and a good organization. It was just me. It was just I was not built to be part of a really large organization like that. So I just had a conversation with the CEO and said, “Hey, listen, I think it’s time for me to move on.” And they get it. They’ve acquired other companies. I’m not the first person to shock them. In January of 2020, I announced it to my team that, “Hey, I’m going to be leaving here in the next couple of weeks.” And then by mid-January, I was an unemployed bum again.
Greg: So how did that feel after all of that? You did the hard work to start a company, to grow a company, to grow it bigger and bigger and then get through an acquisition and get through the settling inside there. Like, that’s a lot of phases. Did it feel like you finally won the prize and the money was in the bank account, but you didn’t get to probably enjoy it as much? Was it bittersweet that you didn’t have your team to run down the hall every day? What did that feel like for you?
Scott: Definitely, definitely bittersweet. You miss the people. To this day, I’m still in touch with a couple of dozen of them. But you do miss the people. Some of these people had worked for me for six, seven, eight years, and it’s tough to all of a sudden just say, “Bye.” And you leave, and you want to also give them space, right? I almost severed ties for about a year just because I don’t want people thinking that I’m just like trying to stay involved in some way, shape or form. So it’s tough to leave. But at the end of the day, everybody has to make decisions based on their own personal wellbeing, goals and aspirations. For me it was just, hey, I had done my time and it was time for me to kind of look at the next adventure.
Greg: So there’s a next adventure in there. Did you take some time off and, whatever, travel the world or buy a new house or get the boat you always wanted and then you sit on the boat and realize, I’d rather be creating a company or whatever? What did you do? What was your big prize here?
Scott: COVID kind of put a dent in any sort of plans, right? So I quit in January, and come March, we go away every March. My wife goes usually for a longer time than I do. And she had left and she calls me up a week into and she’s like, “You’re not coming. They’re kicking everybody off the island. I’m coming home.” And that’s when you’re like, “Hey, what’s this thing COVID going around?” So not only do I not go anywhere, but all my kids move back home. So all of a sudden I’m in a full house again. So that was my prize, spending quality time with my three grownup children.
Greg: So how long did it take to you, Scott, to start a new idea and start playing around again for a new company?
Scott: So I did take some time off. You mentioned boats. We’re a big beach family, so we’ve got a place on the shoreline. We spent time down there. I have a boat, so I spent a lot of time on the boat. But then being in Connecticut, winters suck. So by the fall of 2020, I was like, “Okay, what am I going to do with my life?” And the funny thing is, my wife went back full time because the kids had all flown the coop. So now I’m in this house by myself, and so I’m having full conversations with the dogs. And my friends say I’m crazy, but anxiety set in, right? It doesn’t have to be about the money, it’s almost feeling like you don’t have a purpose anymore. So I started doing some consulting again, but then my former partner, John, he’d actually quit as well about six months after I did. One of my former developers had approached me, so we started coming up with ideas. And then shortly thereafter, John joined us once his non-compete expired as well. We started building out a provisioning platform in the cloud, and that is still a work in progress. We’re still kind of at square one trying to get our solution out of the gate.
Greg: So getting the band back together is the old line about that.
Scott: Yeah, yeah. And so I’ve also taken on additional consulting assignments recently, because what’s happened is they have a lot of work to do on the dev side. I need to stay busy. Actually, a VC firm that I’ve known for years, they’re technical founders that think they’ve created the greatest thing since sliced bread, and they don’t know why people aren’t standing in line to buy it. So I go in there and I’m the guy who says, “As soon as you start charging a nickel for this, you have to sell it. You have to have case studies, testimonials. Why are people going to do business with you?” And so I’m helping a couple of their portfolio companies come up with sales processes and strategies and how to create a marketing engine. And I laugh because some of these companies, it’s like you’re showing them how to start a fire for the first time. But I enjoy it. I enjoy learning about new technologies and helping other people try to get their companies off the ground.
Greg: Do you think this new company has some legs or is it an experiment that you have to go figure out and see if it’s got anything going?
Scott: It’s going to have legs, no doubt about it. But it’s just a question of getting out of the gates with that first version. And I think you constantly self-analyze and I think constantly are looking at what’s out there, what the competition is up to. My biggest personal issue is just that I’m used to running at 120 miles an hour. So it’s hard when I’ve built out already sales collateral, the website, we’ve got a Wiki that just has a massive amount of information in it, but it’s just sitting there waiting for the developers to catch up to me, and getting to that minimally viable product. Our goal was just to get something out the door.
Scott: You say to developers all the time, “You know what’s better than a good product? A shipping product.” You can always fix bugs, and bugs in some respects are a necessary evil, because if you don’t have any bugs, if the product’s perfect, people aren’t going to have to pay for renewals and software support. So you need bugs. You need to get it out the door and hear what people think. “Hey, here’s the good, here’s the bad,” and then go back to the drawing board, reiterate, push back out. That’s one of the struggles, getting people who haven’t done it before into that mindset.
Greg: Scott, You’ve shared a lot of lessons in your journey as a practical founder creating valuable companies without big funding. What is the thing you say most often to new founders out there creating companies who maybe think that funding is the answer, or perfect products are the answer, or everything’s going to be huge, or it’s going to happen overnight. What is the bit of advice that you say most often to new founders?
Scott: Yeah, there’s a number of things. One is don’t over raise. Don’t take in more capital than you truly, truly need because every dollar you’re taking in is a dollar that you’re not going to get at the end of the day. But it’s also about just building processes beyond just like the product. Again, so many of these founders, they’re creating a good solution, and then they sit there and they wonder why it’s not selling right or why people aren’t buying it. And they don’t understand. I’m like, “Okay, well, let me show you. Here are some questions you should be asking to a prospect.” And they’ll be like, “Well, that doesn’t have a lot to do with what we’re selling.” I say, “I get that. But you still need to know who’s the boss, what’s the budget, what’s the time frame?” A lot of these basic Sales 101 strategies that these technical founders just don’t think are relevant. They think like, “Oh, well, I’ve created this great thing and people are going to spend $100,000 on it.” Well, they may spend $100,000 on it, but you need to know who’s going to be signing, what the time frame is, what else are they looking at.
Scott: And then also, don’t worry so much about the competition. Focus on your sales. Focus on having a game plan, getting from Point A to Point B. Don’t worry about what’s going on out there with your competitors, and getting it out to a dozen prospects, a dozen customers, getting the feedback. And so there are a number of things that I’ve seen founders… They think they’ve created something wonderful and great. They get insulted when people try to give them criticism. They also are convinced that raising capital is like the sign of success. By the way, I’ve done some investing, and I tell people right up front, I’ve had a couple of good outcomes. One I think of where literally everybody got about 130% return on their money in the span of four years. It was fantastic. I’ve also had an outcome where I invested $100,000 in a software startup and ten years later the company sold and I got $24,000 and a slap on the back for my $100K. That’s a great illustration of a company that raised way too much money and burned through it all. If I could think of things to do wrong, they did them wrong.
Scott: Go it alone as long as you can, as well. Go it alone because you will then benefit when, if it’s five years or ten years, when all of a sudden somebody says, “Yeah, we’re willing to pay you $50 million bucks for your company,” you’re not worried about, “Oh, I’ve got to divide this up amongst 700 different hands in the cookie jar.” Me and two other people own the company. Here are our bank accounts, send the money over when you’re ready. So there’s just a huge swath of lessons that through being exposed to dozens of software ventures, you see them all. You see them all. And many do it right, but many do it wrong. For better or for worse, those are the ones that people poke at me about, right? They’re like, if the company is growing by 400% a year, they’re not saying, “Hey, Scott, can you help these guys?” But when the company’s raised, let’s say a seed round of a couple of million bucks and they’ve gone through it and they’re generating $30,000 a month in revenue, that’s when my phone rings.
Greg: We see the challenges, which is one of the reasons I’m doing the practical founder thing and advocating for practical founders as another way to do it. It’s not the only way to do it, but after you see a lot of the overfunded, didn’t make progress, and the founders and investors don’t end up with much game, you realize that sometimes, just as many times, slow and steady, high-value product companies and exits are the better way for a lot of founders.
Scott: Yeah, I think I made a comment on one of your posts on LinkedIn where I said, “This is a marathon, not a sprint.” You see in the news all the, “They’re a unicorn. They’ve raised $200 million.” But there was one a year or so ago on LinkedIn that I finally chimed in on and I’m like, “I know this company. This company is not making money. This is complete BS that you guys are promoting it as a unicorn. It’s wonderful because I know this company and it’s going sideways.” You said it best, there is no “this is the plan and everybody should follow it.” The road is curvy and it’s not always black and white. Most of the time it’s gray. But I am a big believer in just creating a shippable product that becomes a good product, but also executing. It’s executing whether it’s development, support, sales, or creating processes that are documented, because if they’re documented, you can scale it so that you as the founder don’t have to be involved in every deal. I mean, one of the firms I’m dealing with now is like the CEO has to be involved in every deal because it’s all in his head. I’m like, “Yeah, that’s got to get documented because when you get hit by a bus on Monday morning, you want to know that your company is going to survive.” And that was one of the things I was always proud of. I always said like, “I know the company can survive without me because everybody knows what needs to be done because it’s all documented.” So I was proud of that because most people puff out their chests and say like, “I’m the brains of the organization. They can’t survive without me.” I thought just the opposite, which was, I’m most proud of the fact that these guys could keep chugging if I’m not here.
Greg: That’s really valuable. And you’ve created a real company that isn’t really just dependent on the CEO. What those kind of founders don’t realize is that when you sell your company, that’s what the acquirer wants to buy. They want to buy a system that runs without the founder, and if the founder leaves in a week or a year, it doesn’t matter, right? The thing will continue and probably be better off. They want to buy a factory and a revenue stream, not the art and science of a particular person who might leave.
Scott: When we were acquired, one of the comments that one of their finance people made was we had better processes and structure in place than 95% of the companies that they’ve looked at. You know, they’re looking at a lot of companies, obviously, in terms of who they’re going to acquire and they said many of them are just flying by the seat of their pants, nothing is structured. Again, the CEO got 90% of the knowledge in his head. They couldn’t buy the company because they’d have to basically rebuild it from scratch. I was very proud of the fact that when I decided to leave, I even mentioned to the president of the company, I said, “You guys are going to be fine. You guys are going to keep on chugging. I don’t expect you guys to miss a beat.” And I’ve heard that from my contacts there, from the president, that yeah, they continue to cruise. You as a founder can take that… You could be like, “I can’t believe they don’t miss me. They can’t possibly survive without me.” I’m okay with that. I think like, hey, listen, yeah, I hired great people and I’d be shocked if just the opposite happened. That would have shocked me if the wheels came off the bus.
Greg: Well, that’s awesome insight and knowledge, looking back on your long career and I’m excited to hear what you are working on and getting something going in the practical founder way. Scott, I really appreciate you sharing your story on the Practical Founders Podcast and some of the best lessons learned there. I really appreciate it.
Scott: I appreciate you having me on. I’ve been kind of checking out your information on LinkedIn. And one of the reasons I reached out to you was so much of it hits home. Because I say to myself, I’ve watched some of the podcasts and you recognize like, yeah, we all run into these issues. We’re all dealing with, maybe it’s a sales issue or a development issue, having to take a step back. And so it’s good to hear those stories and be able to relate to them, being like, I remember I had the same issue, it drove me crazy and hearing how other people deal with things.
Greg: Awesome. Thanks again, Scott.
In this episode, Scott explains:
- Why they sold their product aggressively, but grew the business steadily and managed cash conservatively
- How they generously compensated salespeople and employees rather than give incentive stock options
- Why they decided to sell the company rather than raise funding or keep growing organically
- What it was like to join their acquiring company and be part of a much bigger team
- How he helps tech founders understand the basics of selling and what is needed to create an initial sales machine
MVP Systems Software Company Facts
- Founded: 2008
- Description: Job and workload scheduling software for IT departments of any size company all over the world
- Number of Employees: 70 at the time of acquisition
- Funding: Bootstrapped with founder time and savings, then funded with customer revenues
- Acquisition: MVP Systems Software grew to over $10 million in revenue before being acquired by Fortra (formerly Help Systems) in 2018 for an undisclosed amount
- HQ Location: Hartford, Connecticut
