Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses for an audience of real entrepreneurs who are building their businesses. Um, and often they come back and do interviews about what they were building and how successful it was.
And I love that circle. So joining me today is an entrepreneur who software I would not at all have appreciated when I was in high. And I went to, I went to Brooklyn tech and engineering school. When they tell us about all these different drill bits and all these different ladies, I was open and I got it.
And then when they started to say CAD cam software, I said, who cares? I didn’t fully get it. And my, my hope is that people who are listening to us don’t blow it off the way that I did when I first heard about it, because I think it’s becoming a bigger and bigger part of our lives and it should be an even bigger part than it is right now.
If you wanted to sketch out an idea for a website, you can do it on an app. You could do it on a piece of paper. Hey, do you want to go high in, get yourself a fricking iPad pro like I do and draw it on there. And now you get a sense of what it looks like. But what if you look at that iPad pro and you see that the pencil looks pale and white, and you say, what if I could add a nice little cover to it?
Imagine all these other iPad pro owners want a nice little sleeve for their iPad pencils. I want to design that. Maybe make a little bit of money. Well, you can’t do that on a, on paper because the pencil is round. In fact, it’s got this little flat part and you want to accommodate for that. So how do you do it?
Well, that’s where CAD software comes in. Computer aided design. It lets you sketch out these products that are in 3d and do more than you would if you could just sketch. Well, it used to be that CAD software was available in these giant machines that only our teachers at Brooklyn tech had access to. And we could never take home.
Joining me today is an entrepreneur, John McElhaney, who said, you know what? Why don’t we make it more accessible, we’ll put it on desktop computers and he did. He helped bring that revolution forward. And I’m oversimplifying by saying he’s just moving it on to desktop computers, but he did, it created a company called solid work w helped create it became the CEO of it, uh, sold the business.
And then he got into cloud computing and he realized, you know what, all software’s going into the cloud, not the desktop. And he had kind of a, I don’t know if he would say a wrong direction of misdirection, but he took it in one direction that didn’t end up having the big payoff. And then he said, you.
What if we take this whole CAD thing that we’re, that we understand and put it in the cloud? Well, not only does it mean that people don’t have to maintain their software on their desktops, but, and it’s always up to date, but also they could start collaborating. They could do other things and boom, that’s the hit business that he created.
And I invited him here to spend some time focusing on it’s called on shape. And I wanted to have maniere to talk about how he built his company, how he grew it, how he sold it and what the potential is, and we can do it. Thanks to Tufin actually one sponsor today. HostGator HostGator bought all the ads in this, in this interview.
And it’s a place I’ll tell you later where you can go and host your website. So first, John, good to have you here,
John: Great. Thank you.
Andrew: John. What’s a description that you’d use for Onshape. I did my best to explain it and why it’s so important.
John: Yeah, you did a pretty good job. Look, the world in which I live in is a world that we actually all live in, which is we deal with physical. And Onshape is a computerated design product, and it really affects all the things that aren’t alive, whether it’s the coffee maker that used this morning to get that cup of coffee to the shower handle that you turned through to the car, that you may have been driven.
All these things are designed using CAD products and with solid works, we brought it to the masses. There was this really powerful technology called solid modeling that allowed you to really define things. And then ultimately. They were perfect in terms of dimensional accuracy and smooth to the touch.
And then you can use other applications to actually machine them and create the molds. And all you need to do is look at products and you can see products from 20 years ago were boxy and kind of ugly. And now you see things are very smooth and sleek. That’s all because of computerated design products, but specifically solid modeling products.
And when we started solving. These things were only available to the largest and richest companies in the world. We essentially took that and democratized it and brought it to the world on PCs. Fast-forward we dealt with a lot of these companies and realized that most of them, while they enjoyed the benefits of some of this new technology, it was incredibly expensive for them to do the care and feeding of the system to keep things updated.
And, you know, they all dealt with the problem that we, we as individuals have dealt with, which is if you have ever worked on PowerPoint or Microsoft word, and you’re working with somebody else trying to get something done and you it’s Sunday night and you call that last version, the final final version as of 7:59 PM.
It’s No. it’s it’s final final as of 8:01 PM. And you come up with your own version. All these things were kind of a lot of friction of how people work together. And we saw Google docs and we said, can we take the power of what we brought to the masses before and put it on a new cloud and mobile platform to allow people to do real time sharing.
You know, dramatically increase the presence globally, allow people to be far more efficient, how they design and build things. So the next generation entrepreneurs can use our product very easily to go and build a prototype of their, their first iteration of their idea, or bring the products to market.
So Onshape it’s been a great, great success.
Andrew: My focus is in about how my focus is, how you came up with the idea, how you launched it, built it, sold it, but you know what. Before I even asked the basics, like how much did you sell it for? What was it like after the sale? Let me ask you this. Why is it that we still have to explain to my audience what CAD software is?
Why is it that I still have not used CAD software outside of high school? When you talk about Google docs, we’re all using Google docs tools, a tool that used to be available just to people who are professional writers. Why aren’t we at a place where everyone is using it?
John: Yeah, good question. Well, up until Onshape, the short answer is it was damn expensive. The license of, of, you know, entry-level CAD software for solid modeling was $4,000 a user. So you’re not
Andrew: it starts it now it starts at 1500. I think you even have a free version, right?
John: We have a free version. And by the way, w you know, education wise, you know, it was expensive because you had to run it on these dedicated systems with Onshape people can run on a Chromebook, they can run in their iPad. They can, you know, that that iPad you’re using. It’s a great computer to run on shape.
You can run it on your mobile. You know, when we had the pandemic happened in education, we went from about a hundred thousand users in the education space and students to now we have over 1.5 million users. It just exploded in terms of usage. Now, will that be for the average person who doesn’t do any design?
No, they’re not going to use our product. We’re not Adobe illustrator. That’s a much more horizontal product. This still is a design product. But the amount of people who are creating and building things that go into Etsy and going, you know, that’s sort of growing and it’s growing because of tools like Onshape.
Andrew: But so then give me an example of how someone who might use the free version created something that they’re selling on Etsy. I have a sense of what it is, but do you have an example of what’s being created?
John: Well, the free version is for non-commercial usage, but
Andrew: Oh, so you can’t use the free version even on even to make and sell handmade stuff or essentially
John: No. it’s not it’s, it’s, it’s meant for getting people in the learning. If you’re making money off it. we have a
Andrew: Okay. All right. So that’s 1500 a year. That’s that’s inexpensive.
John: very inexpensive for what can So look, th th th the reality of, yeah. If you look around anything from signs to, to, um, holders for different products to mounts, you know, I, I see you now, you’ve got a microphone mountain, you know, you may want to modify that microphone.
You can personally go and make modifications for it. So there’s all kinds of, you know,
Andrew: But you’re saying that if I have a different idea for this Mount, this Mount actually needs to be clamped onto the desk. It’s a pain and most people are not going to do it because they don’t want to ruin their desks. There are a lot of podcasters who don’t understand that they should put their mic on a, on an arm so that it stays off the desk.
And that way, when they bang on the desk, it doesn’t go into the mic. And also they have desk space to keep their notes. If I had an idea for how I could have. Something that would hold it on the bottom. Instead of having a clamp onto the desk, I would be able to design it with Onshape.
John: Very much so.
Andrew: Can I put this
John: able to share it very easily
Andrew: Can I put
John: a link.
Andrew: Can I put what’s already here the way that they built it at road into your system and then make changes to it? Can I get my
John: Yeah, well, a couple of ways to do that. One of course, if you had, and you knew the manufacturer, you can reach out and see if they in fact have right. 3d data available. Many people don’t many manufacturers. Do you go look at parts that are out there? People have PDFs, but they also have 3d solid models that you can download and design around.
So in this case, if your, if your microphone manufacturer had their 3d model available, many people probably do. You can take that and use that and build off of that to make.
Andrew: Okay. All right. Now I’ve got a sense of it. You know what else I have in mind? Imagine this, imagine someone who’s listening to us who says the camera that comes in with, in their computers just absolutely stinks. Right? The camera on their phones is phenomenal. What if you can use the camera on your phone for a zoom meeting there’s software that does it.
There’s not a holder that does it. And so if you look at people who use their phones for, for webcams, for zoom meetings like this, they often will hook it up in some weird way, have a stand that’s made to hold up a camera. I could maybe invent. It’s not really an invention. People have been doing this, but I can create my own version of a holder that will hold my iPhone on top of my laptop.
Use Onshape to do that. And then 3d printed, I guess at first. And then when I’m ready for a manufacturer, I can just send them the files or give them access to my Onshape and boom printed and, or, or manufactured, I should say. And then start selling that. That’s what, that’s the magic, John.
John: You got it?
Andrew: All right. So from what I understand, one of the reasons why more people are not doing this is first, it hasn’t been available to the masses long enough.
Right? When you think about Google docs, why are we all using it? It’s because we all were using Microsoft word and before that word perfect. And before that, and so on, the second reason is schools. Aren’t teaching it and now you’re starting to get more schools teaching it. And the third is pricing. All right.
I’m with you now on the future, I’m with you on the present, let’s go back in time and understand how you got here.
John: Sure.
Andrew: Are you someone who grew up like geeky, like this who love to make stuff? Is this, is that where it comes from?
John: You know, I, I grew up, I worked a lot with my dad doing stuff. I love kind of pulling things apart and fixing things and you know, my dad and our neighborhood people would come over and want to borrow a tool from?
my dad. Inevitably what they didn’t really want the tool. They just wanted my dad to help fix it.
Well, you know, I kind of helped them with a bunch of things, but I wouldn’t say I was a great engineer because when I’d take things apart and put it back together, there’d always be an extra screw or bolt laying around. And so I won’t lay claim as being a perfect peak. You know, I have some great business partners and friends.
I’m a mechanical engineer. And I’ve been in and around the design space forever, but it started, my career really started. And it, my interest in this area started when I was a junior in college between junior and senior year, I worked, I went to university of Rochester, Rochester, New York, and I wanted to spend the summer up there.
You know, that one beautiful day that they call summer in Rochester. Well, that summer I ended up working at this, this nuclear fusion lab called the laboratory for laser energy. And I convinced this guy that I could do design work. And so we were using drawing boards. So I walked in there my first day and I was helping to design mounts for optical fixtures and stuff like that.
And he quickly sort of said to me, in a backhanded compliment, he sort of said, you’re better at computers than you are designed. Aren’t you. In other words, I sucked. And so, you know, he said there are CAD systems that are coming out. This is when PCs first started. He said, can you help us figure out a CAD system?
And meanwhile, I looked around and we had, you know, four or 5,000 drawings, you know, east sized drawing decides drugs. These are mechanical drawings. And it was completely disorganized. And so I ended up helping to find a CAD system that ran on a PC when they first started and convinced them to get a bunch of cabinets, to kind of hold the drawings and bought a bunch of 3m tape with holes in it and a bunch of Sharpies.
And then also bought the software package called DBAs at the time it was a PC-based database. And literally I came up with a numbering system for kind of the targeting bay for the capacitor bay, for the equipment, you know, the thousand series of 2000 series 300. And got the drawings organized, wrote an application to allow them to kind of do a bunch of queries to retrieve the drawings.
And then we built the CAD system. So it was helping them to, you know, figure out a new design process and organize things. And 40 years later, I’m helping people find a guide system, organize our data and build better design processes. You know, it’s something that I believe that there’s a lot of ways that we can improve product design.
And I saw the opportunity with, with software to really change the processes of how people.
Andrew: I see that I also feel like it just keeps getting closer to this dream of more people making the, the dream that started out, or they got really fired up when 3d printers were starting to become affordable and easy to put into the house. We’re still not fully at the realization, not even close, but boy, we keep getting closer and closer.
All right. How did you and John who’s been kind of your partner throughout all this? How did you.
John: Yeah. So John, her stick is great guy. He was part of the MIT blackjack team. Really
Andrew: Whoa. Wait, I didn’t realize this. This is I’m sorry. It’s kind of confusing that it’s the bigger boat named John. He was part of the MIT blackjack team that went into casinos and
beat Vegas. Really the one that the book and the movie was made out of, he was in there.
John: the movie. So yeah, the movie with Kevin, uh, whatever his name was, John was an advisor to that movie, but anyway, he had a long career from the early MIT days of the original blackjack team, and then was ultimately an investor to kind of, to grow and scale it. But John had started a company and he’d be the first one to tell you it was company called premise.
Uh, they built a product called design view. Great, interesting product. As he would say one of, his best learnings. he really learned, learned a lot about product market fit. Anyway, company that I was at computer vision, uh, got acquired John’s company. And somebody said to me, Hey, you should meet this guy, John Hirschtick.
He’s a great guy. Smart. You guys get off. We were in a meeting together and I was like, yeah, he’s a smart guy. We talked to. Anyway, you know, fast forward a month later, there’s this big sales conference called computer vision, universal, you know, bringing all your sales people around the world, kind of get them all pumped up and liquored up and go out and sell more.
You know? So one night there was a party at the bar and we were there.
until late and two o’clock in the morning. Somebody said, Hey, who wants to go to buzzies, roast beef? And, um, so a bunch of us left and took a cab and went the buzzies roast beef. And, you know, I grabbed my roast beef sandwich and saw John and he, and I just started talking.
We sat in it. You know, table and it’s like three in the morning. And then he’s like, what would you do if you were in charge? And then I said, what would you do if you were in charge and three hours later, the sun’s coming up. And we talked about all kinds of things and realize, you know, we had so much in common and we really didn’t necessarily agree upon actually what we would do, but it was a great discussion.
Yeah. Over the years, just continue to be great friends. And when he started solid works, I ended up joining him, um, and set up our far east channel and our whole partner program to kind of get people going and ultimately was a CEO there for, for seven years. And then, and then took some time off And then we kinda got the band, the band back together again, when we started on shape.
Andrew: And this was, this was the desktop CAD software and you became COO and then CEO ran the company.
John: Right. And then I left, I left, I think this was cash. This is now I’m dating myself, but I left and around 2007. Um, my, I got married and my wife and my stepson, they moved to Boston, got them settled. My dad was quite ill at the tail end of his life. And so I wanted to spend time with them. And so I took some time off.
And then when I was there, I was working with a couple of venture firms looking for new opportunities for them and sort of, you know, kind of looking at opportunities for them and, and, and evaluating. I saw this thing called the cloud, just starting. And I remember going to one of the first Amazon beat beat ups in Boston and burner roll goes, their CTO was there and there was, I don’t know, maybe 50 people in the room.
So it was very early. Now that would be 5,000 people in the room in Boston alone. But anyway, I met these founders that were kind of coming up with a very clever idea and spend a lot of time with them. And then the credit crisis. And, you know, every company was sort of saying, we’ll look at anything. We spent time with CIO and we ended up building a company and a product that really helps people take advantage of the cloud with their existing software infrastructure.
And we built that company, um, you know, really realizing we were a little early in the market and, and realized we had to change our go to market. And we worked with a company called Terra, mark that Verizon ended up acquiring and we wanted to be part of their roadmap in terms of how they would deal with customers.
Get our route to market and distribution and ultimately Verizon acquired the company.
Andrew: When you say early, why, why early? Yes. It’s because you’re dealing with big enterprise clients and they weren’t as ready to go to the cloud as say, drew housed in from Dropbox. Is that it?
John: Well, I think it goes yes, but let me just put a little qualifier double-click on that a little bit. We were early because it?
turns out the application that we. You would install in your data centers. It’s worth the background just for a second to
explain. So we, we, we ended up building this application that you install and data center.
And what it would do is automatically create a pipe to the data center, to AWS, to the cloud, and it would encrypt the traffic and you’d be able to move an application from your data center to the cloud. And it was awesome. I mean, it was amazing technical Marvel. The problem is when we went around with customers early on, we got a bunch of customers signed up to try it and they all loved it. I mean, actually there’s a good lesson here for entrepreneurs. Let me put a pause on it. The first thing we said is let’s create this express trial. We’ll let people evaluate the software very easily, download it, try it. And I’m telling you we’re punching way above our weight class. Everybody loved this.
People were talking about us, the media, like I could, I could pick up the phone and talk to anybody because they had heard about this and they were interested. So we’d put this up there as a trial. Let people go ahead and do it. We launched it and it was cricket Ville. I mean, nobody, nobody downloaded and that’s, and I was about to hire 12 salespeople.
So I remember calling our boards and I’m not hiring anybody, myself. And one of the co-founders we’re going to go on bear, hug our initial customers. So we got a dozen, you know, kind of very interesting customers to go and start to evaluate and we charged them for it and they went and deployed it and it worked and they liked it.
But the question was when we asked them, like, why aren’t you still using it? They were like, well, we still haven’t figured out a cloud strategy. And so many of these people would have to, if you think about our business at that time was so early from a market perspective, people had to first go and say, we’re interested in the cloud.
Now let me go try and move my application. Oh, this is hard. Oh, I can use cloud switches. No, this class, which were so we had so long of a road that we’re going to have to try and convince people, and we would have to raise a lot of money. And then meanwhile, it was like the old cartoons. You know, we were going to this tunnel and saw this bright light coming at us.
The steamroller of a train called Amazon was going to build their own solution and crush us. So we had to change kind of our go to market and change our out the market. And that ultimately led to the acquisition.
Andrew: Speaking of Amazon, you told our producer this great fricking story. I don’t know how to tee it up for you, or maybe I should tell it. Um, you know, I’m going to tell it. It’s just so great. You are talking to this one company and they said they have a policy of no outside cloud computing, but the engineers still do you know what I’m talking about?
You want to tell it.
John: Sure. There was a company. I won’t mention the name because they may not be happy and the CFO might be happy, but it.
was a very large company in the Boston. Yeah. And their policy was no cloud computing. You cannot, you cannot use cloud computing and their developers were frustrated as hell because they would go to their it people and say, we need some new computers.
Cause we’re going to work on this new project and then they’d have to get the it and the network security guys. And by the time they provision it, you know, six weeks later they get the computer. Well guess what? Engineers are not stupid. They just sort of said, I’m gonna go use AWS. And they kind of went and started.
Using, you know, basically the cloud and they started doing development in any way. We went into meet with their CIO and the CFO had come to the, uh, to, to the CIO and said, why, you know, why are, why are people in development buying so many books? And it turns out what most of these people are doing is putting on their individual credit card, the Amazon charges and expensing it.
So this strategy of cloud computing, no cloud allowed at all was being totally, you know, kind of run around their it department. They were using the cloud. And then all of a sudden the CIO got interested because it’s like, this is happening now. I got to contain it. And that’s why they got interested in using us.
But yeah, it was very fascinating.
Andrew: I admire that they were willing to find a way to work through it, you know, to say we can’t get, we can’t pay for Amazon web services for a cloud storage, but, you know, We could pay for books. Let’s it’s it shows up as Amazon. It’s phenomenal. All right. Let me take a moment to talk about my sponsor and John.
I want to talk about my sponsor in relation to the, the revolution that I think Onshape is helping to bring about my sponsors. HostGator. I imagine somebody is listening to us saying, you know what? I actually like all these businesses. I don’t have a business of my own. I’m looking to start something. I think one thing they could do.
Is is start of site where, what they do is they teach people how CAD software can be used to create products and sell them. And I would suggest that they, even that what they do is they get a website. They do like little screen shares, where they teach people how to use it. They let them know they can use it for free.
Do these tutorials. I’ve interviewed people who, with these software tutorials can easily make a hundred thousand dollars with, with one of these launches, if not more right. Is that the end of the business? No, but it’s a nice start and they get to be pioneers. People who are bringing to the masses, what CAD software can do.
So you imagine you start off with here’s some videos, here’s some how to tutorials via text here, samples of people who are doing it. Well, maybe you interview somebody who’s on Etsy and you tech just write a text write-up of what, uh, of what they’re doing. Teach it, and then start to create the ad-ons.
Maybe you have a marketplace where you can hire somebody to coach you, maybe a marketplace where you could get hired to do this. Maybe. I don’t know. It goes from there. What do you think John, or that idea?
John: Well, certainly as literally tens of thousands of people are using Onshape and more coming every day. Um, yeah, we need, and, and in the education space, millions of users, there’s always more educational tools that are needed. So if somebody wanted to go and do that, not a bad idea?
people will pay for training.
Um, I’m sure HostGator, I’m not familiar with them. They’re providing the platform that allows people to do that. And, um, and so, you know, anything for an entrepreneur, anything that tools like skater, again, I don’t really know them, but anything that allows a platform to kind of get rid of all the, the, the, the excess heat and energy of having to do something and allows them to focus on what they actually are bringing value to the customer.
That’s a value add for an entrepreneur.
Andrew: I know to use spreadsheet because in school we were required to learn how to use spreadsheets. We were never required to learn CAD software so I could easily dismiss it and then dabble it. It’s not Elyse. And one of my past guests, he said, um, he liked Rome, this note taking app. Wonderful. You said, no one knows about it.
I’m going to teach a course on it. And he made a hundred thousand dollars with it and he wrote about it. This is not his main business. He’s got a digital marketing agency, but he likes to start these little side projects to experiment. All right. Listen, people, whether it’s that idea or something else, if you want to get started, all you have to do is go to hostgator.com/mixergy.
When use that URL, they’ll give you a discount on their already low price. We get the lowest price available and you have an easy way to get started with your website. If you’re not happy with them, they have a 45 day money back guarantee. Check the site for details. And if you are happy, you can keep scaling with them because they have more options than what you’ll see on hostgator.com/mixergy.
But that’s a great place to start. Thank you, Gator. Alright, so company sold. What did, um, what did you do next? How did that lead to Onshape?
John: Well, so we got acquired by a company called PTC PTC. Here’s the amazing kind of story here. If I can just hit a pause for a second, when we started solid. Yeah. The company that we disrupted was a company called PTC. They had a product called pro engineer, and we basically made it easier to use, easier to learn and much more affordable by changing the business model, et cetera.
And literally, I don’t want to say crushed their business, but kinda they had a, uh, you know, a tough journey because we kinda took a lot of market share for them. Fast forward years later, we, we create own. And the CEO of PTC, Jim, Heppelmann really smart guy. We, you know, we met with him for lunch and he talked about kind of his vision of what he wanted to do.
And, and his vision was really about kind of expanding the platform. Cause he believes cloud is, is absolutely it’s ask is whatever these going to be longer term. And so as a result, he saw Onshape as a platform and an opportunity to extend it for many of his other products, they needed their own cloud platform, the provisioning, the versioning.
We’ve done that we’ve taken on shape. If you will. The core of it, we call Atlas, you know, holding up the world for the different applications. And then, you know, they’ve continued to dramatically invest in the growth of, of salespeople, technical people, development, people to expand
Andrew: after the sale of Onshape. I meant. So you, you had a company, uh, just before Onshape, let me see what it was called. It was a, this is cloud switch. That’s the one that you sold to Verizon.
John: the one that Verizon. acquired.
Andrew: You then took some time and then you and John went golfing. You talked about an idea, right? And you wanted to get a sense of what this guy is ready to come back into business because he’s taken some time off.
John: for entrepreneurs? Let me tell you, this is a great question. We, we we’d spend time. It’s all, she had taken some time off.
and we were driving back from Newport of all places and we’re sitting in traffic and, you know, that’s when we were talking about, and I said, John, are you really ready to come?
You know, put in the hard work because it’s easy to reflect back on, you know, with rose colored glasses and look at those days, early days of solid works and think it was easy. Well, it was a shitload of work to make it happen, you know, and we knew that this was going to be a lot of work as well on the way.
So that was one of the questions I had. And then the question was, do we also have a common view of how the market has evolved? And we spent a lot of time talking to. How customers were reacting to some of their challenges and, and the prospects that we would be going after to see, to see if we had a shared vision about that would be, and we did.
And, um, and so we ended up basically, um, uh, his one-year noncompete and then. And, and that was, uh, October 31st. It ended in 2011 and on October 29th, we were discussing kind of, you know, how are we going to organize the company? How much money would we raise? And the classic entrepreneurial thing of splitting up the pie in the arm wrestling.
And anyway, we, we, November 1st we reached out and got some of the old gang back together. And by Monday we had raised $9 million and.
Andrew: before you go from there, the idea was just, was it just to take this thing that you, that you’ve done together before and bring it to the cloud, which is the life that you are living right now? You’re that’s it.
John: Well, it was, it was the cloud is a new platform. And as a consequence of a new platform, usually, especially in this office. Technology disruptions typically happen with a new platform. You know, you look at the iPhone, it was a new platform. It allowed whole new businesses to create think Uber think GPS, like those things could have been possible before the cell phone, before that really that so new platforms create new opportunities to rethink the problems.
And one of the things that was very clear is many of the people we had sold that before it was solvers where we’ve made their lives. They had many problems, not because of Sollars, but just the nature of doing design work and, and how people share information is very challenging. You know, the, the versioning issues that people have.
And so we thought there’s a whole nother way. When you think of it.
as a platform that you, you start from scratch and sort of metaphorically throw all the stuff off the table and start a new. And if you start a new, you think about the problem differently. For example, in the Onshape world, there are no files.
There’s no safe. In the solid works world, everybody would hit control S which is a save function every two minutes so that it wouldn’t, you know, they wouldn’t lose their work. If things would crash when Onshape you don’t have to worry about that because things are saved as a transaction. So the platform allowed us to really think differently.
So we didn’t right. For, we had a prototype to test performance, but we didn’t write a lot of code early on. We spent a lot of time kind of thinking through some of the architectural designs and questions that we had. And then, then we started prototyping some of those challenging topics and areas. So yeah, we got the team together.
We still didn’t know if it worked. I mean, the risk that our investors and we were taking early on is could we build this and what it works. Um, and, um, and that was a long journey actually. And, and, and, you know, and an exciting one, but.
Andrew: How long did it take?
John: Well, it took three months to get the first prototype built that we could show some of the concepts and, and that, that we use, you know, we didn’t build a lot of functionality into it, but we, we built it to stress. You know, latency, meaning what would it be? The performance, how big of models could we have?
Um, and then once we built it, we had hired this brilliant young guy that we knew from our sod works days. We’d funded his research at MIT and we recruited him to come join us. We had hired him when we were at solid works, when he’s 16 years old, brilliant, brilliant Russian mathematician. And he came up with an idea of building a new language, if you will.
And so we had already gone down a path with three months of buildings prototype and would kind of. And he had this idea for something we call feature script, but for the users, they don’t need to know it. It’s kind of the basis of how we built our application and the power of that potential to allow people to customize and do things was transformative, but it required us basically to go and hit the reset button.
And we said, you know what, we’re going to hit pause. Let’s go take that prototype that we’d built and reimplement it, creating this thing called feature script. And. You know, iterated on the power of this thing called feature script. And it’s one of those days, zero decisions. You can’t go and retrofit this and you have to do it from the beginning.
So we actually hit the pause button and restarted that prototype. And after another three months, six months into it, we realized, Okay.
this is the right platform. We went with that and kind of scale. Well, let me tell you that story, because this is one where it’s really embarrassing and there’s a little bit of hubris here, which is, I’ll tell you the biggest mistake I made and biggest miscalculation I made so early on some of our investors or people were saying, well, Who are going to be your beachhead customers, your early customers?
And I said, oh, it’s going to be the solid or expand boys. They love us, you know, and everybody agreed. And so we went and kind of built the early prototype and reached out to a bunch of these fanboys and guests. All of them. Every one of them took our call. Everyone was thrilled, but they were thrilled because we were the solvers guys, not the hand shake guys.
In fact, I was, 100 completely present, completely wrong. They weren’t the first people we should talk to. They were the last people we should talk to. Cause they’re the fanboys. Those are the last ones that are going to leave. Solid works. Not the first. So how do we get customers? Well, it comes with the story of what’s called product market fit.
The short answer is we did a lot of cold calling and tested by vertical segments in different product areas, but in the venture capital world, in the startup world, there’s something called product market fit. Whether your product is a service or a specific product it’s does your product or service match what a market need is and will people pay for it?
That’s kind of the, the gold that, that, that investors and people are looking for. And the way I describe that to people who are not in the technology world is I refer back to the kid’s storybook. I don’t know if you, if, if you have children, but there’s a book that you can read to your kids called, are you my mother?
And it’s the story about a little bird that falls out of a nest and goes around the farm and goes to the, goes to the cow and says, are you my mother and the chicken? Are you my mother and the dog? And ultimately a steam shovel from a contractor puts them back in the night. Well guess what product market fit is really about being, are you my mother it’s about going and asking that question, showing the product, seeing it’s shoe leather in the electronic world.
Of course, it’s a bunch of zoom calls, but it’s really a bunch of pounding the pavement and getting reactions. And it’s also a beta testing, the waters seeing who will pay for it and who
Andrew: Who was, who ended up being your first mother, so to speak, who was the first person to say yes, I see this. I like this.
John: Yeah. Good. Quick question. Well, in our world, it was somebody who, um, a company called Ziki. Ziki is a, a machine shop manufacturer. What they do is they take in as like a service offering. They take in, Uh,
CAD data from customers and turn it around and build, you know, machines parts. Now what they were building is really high end aerospace machine parts, but they were bringing in files from people.
Multiple different formats and they needed a tool that they could get access to make changes remotely. And so it was a perfect solution for people be able to take in data, see it, and the manifest or directly off it. So it was a great, a great, a great initial customer. And for us, it was also great because the people they needed to deal with, they became a sneezer, you know, they kind of spread the virus if you will, in terms of, of, of, of Onshape.
So they were a very good early customer. And then of course it grew from there.
Andrew: I know we’re kind of running late. Um, and I’ll ask you about that as a final question, but the penultimate question is this, how much would you say. Yeah.
John: We selled for, uh, just north of about $500 million. I say just north of that, because it was a purchase price, I think, of around $480 million or 400 And whatever. But then we also, they included the cash back to our shareholders. So it’s just north of a half a billion.
Andrew: And then were you able to, to have life-changing outcome from it?
John: Well, you know, John and I have been fortunate enough to kind of have some impacts earlier in our lives, too. Um, but certainly this was, was something that allowed. Um, me to be able to, to, uh, extend some of the philanthropic stuff I want to do and, and be able to do some of the things that, that I would want to do longterm.
Um, and so, yeah, of course it was meaningful, very meaningful and, and even more meaningful is what’s happened since then, in terms of our employees and growth, we’ve kind of doubled the number of employees and we’re, you know, on a global basis now really. And you know, when you start a company, You want to have success, of course, from a financial reward.
That’s, that’s, that’s, that’s a very important thing, but it’s also, you start something new because you see the way the world should be in and you figure if you don’t do it, who else is going to do it? And now to see it started happening is really rewarding.
Andrew: All right. We were rushing through a lot of this because of time, because you started late, you were telling me why you started late and why it was so meaningful. What was going on?
John: I hate being my wife can tell you that I’m always, usually, so we have a bunch of interns. We always hire interns. We look at our internship program as really a kind of hiring program and we get to beta test the interns. And if we like them, we usually hire them. So for the secret, for all those college kids that might be listening.
If you’re between your junior and senior year, make sure you get an internship because most companies are actually beta testing to see if they want to hire you. So anyway, with our salespeople early on, uh, at, at Onshape, we had one young man who took his 401k and he was telling all the salespeople, he cashed in his 401k and bought a bunch of Bitcoins.
I’m not going to beat with a big point. It’s a good investment or not, but the idea of cashing your 401k, I think is just a terrible idea, especially for a young person. And so I stopped the sales team, brought them in a conference when we ordered a pizza and I explained to him, and now it’s, as it’s known, which is scary, cause it tells my age, but I gave him the dad talk and I talk them through and did a little bit of investor talk about, you know, how do you calculate the future value of money and, you know, present value times one, plus I to the ends And is your lever and spending time talking about that and all the
Andrew: all in a one-on-one over pizza conversation with this one person who
John: Well, I brought in the other salespeople then too. And since then, as we’ve hired new people as part of the indoctrination, again, I’m not a financial advisor. I’ve been asked to give this talk a couple of times. It’s now I call it my dad talk about finances. So I had, you know, about 40 interns that I gave him the dad talk.
And it was interesting. One of the young men, his dad’s a financial. And he said to me at the end, which is why I was late. He pulled me aside, said, you don’t like dad. When I was younger, you could set up all these things and you say, I took money out. of your account and put it into this Roth IRA and blah, blah, blah, blah.
And he used to, he said, I used to complain to my dad. So why are you doing that? And he would complain to his mom and his mom would say, you know, long-term, you’re gonna be happy. Your dad. And you said after what you just described, it’s exactly what my dad did and now I get it. And I said, well, it’s not because I necessarily said all the right things I think I did, but it’s not your dad.
I’m not your dad. So you’ll listen to somebody else as compared to your
Andrew: w why, why do you care that they know it? Why does, why does someone
John: what these kids, when they’re in high school or college should be given some of the basic lessons. Why? Because the difference you can make at 22, you know, 45 years later, it can be all the difference in the world about their retirement And savings.
This is basic stuff. And why do I care? Because I owe it to them. I had some mentors along the way. They helped me. We owe it to them. Anybody who’s older, that’s had some good experiences like that. You owe it to the next generation to share that and expand the story. So hopefully some of them took away.
What they did take away is start your 401k early. That’s what they took away at the very least. Hopefully.
Andrew: And I imagine so much more. All right. The company is on shape. John. Thanks so much for being on here.
John: Great. Great talking to Andrew.
Andrew: You bet bye-bye one.