Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com. It’s the home of the ambitious upstart.
What that means is that I’ve got an audience of real entrepreneurs who are so determined to build bigger, better businesses that they’re here to listen to other entrepreneurs talk about their stories so that we can all learn from them and use their experiences to grow our companies. I’ve done over a thousand interviews with some of the most successful entrepreneurs on the planet.
And my style is to go deep on the details so that you can actually get ideas that you can use. Of course, you’re not going to be able to use them immediately. I don’t think life works that way. But the way we designed it is we work with each guest to pick out their most powerful stories, the ones that are most useful knowing that if we pass the information on in story form, it will embed itself in your head and you can’t help but remember it.
So, who do we have with us for this interview? I’ve got an entrepreneur who has been focused on CRM for years, for decades, actually, talking about–when I say CRM, I mean like these things that used to be address books that then became much more powerful than that, that allowed sales people and other people who used them to keep track of people they were interacting with to get to know them better, to close more sales, to build better relationships. He got into the space because he was a sales person who learned that collecting information about his customers and prospects helped him close more sales and do better business.
He created ACT!, which is the software that I used when I was still in school and working for Dale Carnegie. Dale Carnegie is the guy who wrote “How to Win Friends and Influence People.” I went and I worked in his company. One of the first things they did was hand me ACT! and they said, “Here, use this. Whenever we talk to a client, make notes about what we learned about that client in here so that you have it for yourself so other people on the team have it for themselves too.”
Pat is the creator, Pat Sullivan, who you’re meeting today, is the creator of that software and the company behind it. He went on to create another company called SalesLogix. SalesLogix–I think it did even better than ACT!. We’ll find out how well both of them did. We’ll also find out about his current company, which is called Ryver. It’s team collaboration software that makes it really easy for teams to communicate with each other.
This whole interview is sponsored by two great companies. The first will help you host your website better. It’s called HostGator. And the second is a company that will help you hire the next great developer. It’s called Toptal. I’ll tell you more about both of them later. First, Pat, good to see you.
Pat: Good to see you, Andrew.
Andrew: Pat, I’ve been looking at you as I gave the intro. It felt like at times you were kind of shaking your head no or I was off-base. Was I off-base with some of it? Be open.
Pat: Well, there’s only one thing I would correct. I was the co-creator of that. I had an extremely good partner and still a very good friend, Mike Muhney. And it was really a collaborative effort.
Andrew: Of ACT!, yes.
Pat: He was an IBM sales rep, former. I was a former 3M sales rep. In that collaborative effort, we made an agreement that nothing would go into ACT! unless he and I agreed on it. So, it meant we had lots of arguments, but I can’t claim full credit for creating ACT!.
Andrew: Of course. Actually, I did a great interview with Mike Muhney. Anyone who listening to me who wants to really obsess on ACT! should go and listen to that interview and hear that. Good point. SalesLogix was the one–you sold both companies–SalesLogix was the one that did, I said in the interview, probably the best of all of your hits. Do you remember the day that it went public?
Pat: I don’t.
Andrew: You don’t?
Pat: I know that it was in May of 2000, but I don’t remember the exact date.
Andrew: Do you remember its market cap when it went public or its market cap soon after?
Pat: Yeah. It was $200 million to $300 million when it went public. Of course, that was during the mania. It worse to above $1 billion. And then later when we sold it, it was a sale of around $360 million.
Andrew: $360 million. You still owned a piece of it when it was sold, right?
Pat: Thankfully I did. Yes.
Andrew: I noticed your Skype name has the word golf in it, which tells me that you really life golf. Why are you trying all these other companies? I see since then Flypaper, since then Jigsaw Health, Contatta, Ryver–why bother doing more of those things? Why aren’t you just out there playing golf or I don’t know what, buying lots of cars?
Pat: I do like to play golf, but I found that if I played any more than two or three times a week, I get tired of it. Doing what I do, it’s a rare opportunity because I get to work with some really talented young people who I feel keep me young. Plus, I’ve learned that starting companies is the only thing anybody will pay me to do. So, that makes me a professional at something. I can’t be a professional golfer. So, this is the closest I could come.
Andrew: I want to get into the story of how you built it up, but there’s something about your personality that you told me about before the interview started that I’ve got to touch on. You talked to somebody, he started telling you about his life, like really personal things, it seems like, and you did what with all that knowledge, all those little tidbits?
Pat: I’m sorry…
Andrew: I think what you did was you wrote it down somewhere. You typed it into a device. It seems like you do this a lot.
Pat: Well, I’ve made it a habit since ACT! to take notes when I talk to somebody. If I’m talking to somebody on the phone, I will actually type will talking, but I use a silent keyboard, otherwise they’ll hear the keyboard. But after a meeting, I’ll come back and I’ll record what we talked about.
I was on the phone with a guy that I talked to a couple of years earlier. In the conversation, I brought up some things that we had talked about two years earlier. He goes, “Sullivan, you SOB, you’re using ACT!. It isn’t fair.” It really isn’t fair in a way. You’re at an advantage if you remember everything you talked about, even if it was years ago.
Andrew: So, what’s your workflow? If I tell you right now that I love running and don’t play golf, are you going to go and write that down? If you do, how do you use it? Will you write that down, first of all?
Pat: I would write that down. If you told me your birthday, I’d write that down. If you told me your wife’s name, I’d write that down. I might introduce it later as, “Hey, Andrew, how’s running? Are you still running?” It makes me look like I care about you.
Pat: Isn’t that a terrible thing to say? But I actually do care about you enough to record things you said that are important to you. Since my memory is not that great, if I don’t write that down, I won’t remember that you’re a runner.
Andrew: Speaking of bad memories, you asked me before the interview started, “So, your name is Andrew, right?” And you said it a couple of times just to be sure. I’m so glad that you did because I have a horrible memory for names too. One of my little tricks is I have the guest name up on my screen just in case I somehow I forget in the interview, I can just look up to the left and it says Pat Sullivan and the name of the company that you’re with–really helpful. But I feel in life if you have a bad memory for things like that, you’re at a huge disadvantage and the only way to regain not even regain your advantage, but to get an advantage is to have little tricks like writing it down and being aware of it.
All right. So, let’s get into this–ACT! started because you were selling microcomputers. There’s no reason for you to have a microcomputer at the time. You were an early adopter. You just loved the stuff. And then you started coding up software for yourself. What kind of software did you start coding for yourself before ACT!?
Pat: The first thing I did, one of the hardest things that occurred in my job was when somebody asked me to produce a quote. They would usually say, “I want to see it with 256k memory, but how much would it cost if it was 640k?” Back then, a 10Mb hard drive versus a 5Mb hard drive, what would that cost? And an Okidata printer versus an Epson.
So, that could be hours’ worth of work. I coded an application that would allow me to do a quote literally in a minute. In fact, I had customers who would call me for a quote because they knew I could give it to them right over the phone. And then I would fax it to them. I had a really good customer at Frito-Lay where they bought lots and lots of computers from me.
When I started ACT!, I had lunch with the buyer. He asked me, “Pat, do you want to know why I bought so many computers from you?” I said, “Jack, I thought it was because I was good looking and just a great guy.” He said, “No, you were the only guy I could call and get a quote.” And I would order it usually that day.
I would do the same thing with computer LAN or business LAN and it would take them a week or two to get back to me and usually you had the computer installed when they got back to me. So, I always like to use tools that allow me to make the sale before my competitor even knows there’s an opportunity.
Pat: Speed is most often an advantage. So, it was all about for me speed. It was also that I hated routine. So, anything that was routine I would try to program it so that I could just hit a button and make it do something I wanted to do.
Andrew: There’s a big lesson in that. We talk so much about customer facing software. How do you improve the software better for your customer? But what I’ve noticed is there are many entrepreneurs who will hire developers if they can’t code it up themselves to create internal software for themselves so they could do things that would otherwise be monotonous routine, do it faster and without all the effort.
Those little things we create for ourselves are even more powerful sometimes than what we create for our customers because they make us better longer term. So, you did this stuff for yourself. I’m imagining what you did was you said, “I’m going to create a digital address book for myself,” right?
Andrew: Why did you want that?
Pat: I used a day timer. I recorded–I was doing it manually and hand writing everything that I really wanted to do on a computer. Since I was selling computers, I thought it was stupid that I wasn’t using one. So, the goal ultimately was to have a computer do for me what I was selling other people on when I sold them a computer. That was the goal.
Andrew: I see. So, you built it up for yourself, but people started seeing it. What was their reaction?
Pat: Well, people started looking over my shoulders, especially once I did the contact management piece, they started saying, “Can I use that?” I heard it often enough to say, “I think maybe I could sell some of this stuff.” That was the germ of the idea of starting a company. I and Mike Muhney were good friends. We talked about it over a long period of time and decided, “Let’s try it. We’ll never know if it would have been a success unless we try.”
Andrew: I remember Mike telling me when I interviewed him that you guys raised $100,000. You blew through $85,000 of it–I shouldn’t say blowing it like you wasted it on strippers and coke–you spend $85,000 and you still didn’t find the product. What was the challenge after that spend?
Pat: I’ve never done a startup where you get it right the first time. SalesLogix was probably the closest. But even there, we built something and then started over. It’s just the nature of the beast. You don’t get it right the first time. You may not get it right the second time. And yeah, we blew through $85,000 and we were down to our last $15,000 and it was like, “What the hell am I going to do now?”
He remembers–I don’t particularly remember it because I don’t have as good a memory as he–but we had a breakfast on a Saturday morning and said, “What are we going to do to prevent ourselves from dying?” We decided to focus entirely on just the ACT! piece. The problem was we were doing too much and we wasted $85,000 trying to do too much. So, we focused on ACT!, which turned out to be a massive product ultimately in terms of scope. But it’s not always apparent what you should focus on when you first start.
Andrew: I see. So, the initial product wasn’t just contact management or CRM, which is customer relationship management. It was that plus the quote plus all these other things you built. You said, “All right, let’s package this into something for people. How did you know that wouldn’t work? Was it that you couldn’t code it all up in a way that was presentable?
Pat: Well, we knew $100,000 wasn’t going to be enough to get it done. In showing what we had built, it was clear that actually the bigger product had a smaller market, whereas the smaller product, everybody in business has contacts. In fact, the codename for ACT! before Mike came up with a name ACT! was YES, which was an acronyms, of course, since he was an IBMer. It stood for Yes, Everybody Sells. Anybody who maintains contacts is really selling. That turned out to be a massive market, whereas the other would have been much smaller.
Andrew: He talked about the sale, so I’ll just touch on it to remind anyone who hadn’t listened to the full interview. Frankly, people, go listen to that interview. It’s really good. You guys ended up selling the company for how much?
Pat: $43 million to Symantec.
Andrew: And what percentage of the business did you have at the time of the sale?
Pat: I believe Mike and I each had about 10% of the company. We had raised about $7 million through the course of the six or seven years that we had ACT!. Every time you do that, of course, you take dilution.
Andrew: So, then you started SalesLogix. What was your original idea behind that?
Pat: Well, I actually just published a blog post last night. In it was SalesLogix.
Andrew: On what site did you publish it, by the way?
Pat: On the Ryver blog.
Andrew: Ryver.com and I’ll look at the blog. So, tell me about where that idea came from.
Pat: Well, it was parent from all the work that we had done with ACT! that ACT! was primarily an individual user product. We never did a very good job of making it a networked product. Of course, networks were very new in the late 80s, early 90s. It was very, very obvious that there was a huge market above the individual user but below the enterprise CRM applications that had cropped up during the ACT! days, things like Siebel and things like Scopus and Vantive were selling enterprise CRMs.
So, in the midmarket, we knew there was a very, very big hole. As I say in my blog post, it was a hole big enough to drive a truck through, so we built a truck.
Andrew: So, what you’re saying is ACT! was made for individuals putting it on their own computers. Each person in the company would have it. The higher end, they had much more networked things. But for someone like the office that I worked at, at Dale Carnegie, if they wanted everyone to have access to everyone else’s contacts, they would have to use each other’s computers essentially to see it.
There were ways around it. I think you could put it on someone’s computer and then access that person’s file and I think it even allowed two people at once, but it was a very complicated thing that only geeks could use and that’s why I got it. But it wasn’t meant for the average person. Am I understanding the problem right?
Pat: Yes, basically a shared contact database so that when I take notes about you and someone else in my company talks to you and they take notes about you, we both share those notes. They see what I’ve learned about you. I see what they last talked to you about.
Andrew: I see.
Pat: It’s seemingly a simple problem. But it was one that no one had really addressed in the midmarket.
Andrew: What’s the midmarket?
Pat: That’s a good question. I’d classify it really any company that’s between 20 people or 20 potential users and 1,000. Anything above that would probably be enterprise.
Andrew: So, what did you change about the software itself beyond making it work better for a network team?
Pat: The key to success in the midmarket is to have a product that works well in a channel of value added resellers who are able to go into a company, listen to the problem they’re trying to fix and customize, in our case, SalesLogix to solve those very specific problems. The mid-market generally doesn’t have IT people. So, they need to hire it.
We built SalesLogix totally with the idea that it would be customized by a third party. So, we had all kinds of tools to make it easy for them to customize. We were the first ones to do that. We recruited channel partners at a rate of at least 50 every quarter and by the time we sold it, we had 750 active channel partners selling and implementing SalesLogix.
Andrew: Channel partners are the people who sold the product for you. Let’s come back in a moment to that. First, I should talk about my sponsor. I got this great email, Pat, from someone from my audience. A guy name Yed Anikpo–I hope I’m pronouncing your name right, Yed. Check out this subject line. He says, “My Toptal app hit number three top paid in the lifestyle category in the iOS app store. You recommend Toptal…”
Toptal, by the way, Pat, is this network of developers where they hire the best of the best developers. When you need a developer, you contact them. They ask you what kind of developer you’re looking for. How do you work? How long? Is it full-time, part-time, project-based, etc.?
Anyway, this guy, Yed, contacted them and he said, “You recommended Toptal. I hired them using your link, launched the app that they built for me last Thursday,” which was about seven days before he emailed me. “Now my app, the 7-Minute Prayer Challenge is comfortably sitting in the top five paid apps under the lifestyle category.” He gave me a link to see it. “I’ll update you.” He gives me a little bit of revenue numbers on it, which is pretty exciting.
That is amazing. I don’t want to promote that as the thing that Toptal does. They’re not there to help build your business from scratch and get you into the App Store top rankings immediately. What they do is they get a network of really talented developers, phenomenal developers so that when you call up and you have an issue, like an entrepreneur who I interviewed the other day who said, “I needed a Ruby on Rails developer for this new project. We didn’t have enough time. We wanted the best because I wanted to spend money to commit to making this business as good as it could be.” They had that person for him and he was able to hire him and get started. He actually ended up hiring multiple people.
Many people who I’ve interviewed have hired from Toptal. Many people in the audience have hired from Toptal. If you are looking for a great developer–obviously you too, Pat–but anyone in the audience, if you’re looking for a great developer, I’m not just talking about someone who’s going to be the cheap developer who will just do exactly as you say, but someone who can really think and really amaze you with how far they can take your idea when they start to code it, well, the place to go is Toptal.
Now, because they really value Mixergy listeners, they know that Mixergy listeners are the people that the rest of the tech community go to when they have questions like, “Where do I hire? What software do I use?” etc., they really want us to help spread the word about them. So, they’re eager to get as many people to use Toptal as possible. So, here’s what they’re offering Mixergy listeners. Mixergy listeners will get 80 hours of Toptal developer credit when they pay for their first 80 hours in addition to a no risk trial period of up to two weeks.
This company is doing phenomenally. I think they’re doing $100 million in sales a year now because they’re just growing so fast because they hit on something huge–great developers that you can hire fast who can get the job done. I don’t know how headhunters are going to survive this kind of disruption, but that’s what Toptal is doing. Go sign up right now. Go to Toptal.com/Mixergy.
The coding, Pat, for SalesLogix, how long did it take and who did it for you?
Pat: It was our own programmers. I believe it was around 12 programmers.
Andrew: You hired them? You started a brand new company at this point, right?
Andrew: So, you hired–
Pat: Back then, things were very different. You could raise venture capital to actually build a product.
Andrew: So, you raised $17 million, I think you told Jeremy, our producer.
Pat: Before I shipped the product. You can’t do that today. You have to find a way to ship the product and then after you’ve had some success, you can then raise money. It makes it very difficult to build a significant application. However, it costs less money to build a significant application today than it used to. So, they were our programmers and it worked out really, really well, great group of programmers. In fact, four of them work for me now at Ryver.
Andrew: Still work for you now today at Ryver?
Andrew: Okay. So, you built the software. Did you have customers beforehand? I remember Mike said that before you guys built ACT!, one of you went to talk to Visa. A VP of sales at Visa said, “Tell you what, if you build this thing, I’m going to give it to all 500 of my sales people.” You finally built it. Do you remember how many?
Andrew: Instead of for all 500 or 2 instead of the 500 that he promised to buy for.
Pat: As I recall, he actually gave us a purchase order so that we could use it to help us money, “Hey, Visa wants to buy it.” When we went back to him and said, “Okay, it’s shipping. Where do you want us to send the 500?” He said, “I didn’t mean all at once.”
Andrew: All right. But you got something out of it too. You got that purchase order that you were able to raise money with. What did you do differently to get your first customer with SalesLogix?
Pat: Well, our first customers really were the channel partners. We knew a lot of channel partners from our days at ACT!. The ACT! product, the Goldmine product, almost half of our sales was done by a network of certified consultants. The same was true with Goldmine. So, we knew who they were.
Andrew: So, these were people who–can you tell me a little bit more about who these certified consultants were?
Pat: Yeah. A typical case would be a company, let’s say Visa. Visa starts using ACT! There’s enough customization, there’s enough power there that people would go, “This is really, really cool, but I know it does a lot more than I don’t really want to take time to figure out. Usually within a place like Visa, someone became the in house expert.
It wasn’t unusual for him or her to finally say, “Huh. I think I could go make a living doing this for other people.” And they would leave and they’d hang out a shingle and they’d get three, four, five customers and they’d start a business. We started getting calls from people asking us if we had a certified consultant program and we said, “Well, we do now.”
Andrew: At SalesLogix, you mean?
Andrew: At ACT!.
Pat: At ACT!. So, we knew there were these channel partners that were out there. SalesLogix was an opportunity to move upmarket. The better ones, the ones that were the most technical could readily adopt SalesLogix. When we launched April of 1997, ten years to the month after ACT! launched, we had 50 channel partners already recruited, trained and ready to go, so when we got leads, we were able to turn them over to them and we took off.
Andrew: And were you basically using the same ACT! certified trainers, certified consultants?
Pat: Some of them were the same. Some of them actually were Goldmine’s better channel partners. So, we didn’t really care where they came from.
Andrew: But you trained them first and then they were able to introduce it to their customers and say, “Hey, you’re already using Goldmine or you’re already using ACT!. You might want to consider this new software that actually works better for teams.”
Andrew: I see. Goldmine was a competitor, right?
Pat: Yes, they were.
Andrew: I think Goldmine is still around.
Pat: Very much so. Yes.
Andrew: I see. So, they then were going back to their people, making sales. That’s where the first batch of sales came from.
Pat: Well, yes. But also because we had raised a lot of money, a lot of that money was for marketing. We were able to run ads. The phones started ringing from day one. Those leads we would turn over to the channel partners and they would go out and sell them and close them.
Andrew: Back then there wasn’t much collaboration with customers. Like today, you might go and bring customers into your office and work with them or go into their office. Was there any collaboration at the time for you with your customers or channel partners on what the product would become?
Pat: Channel partners and customers love to tell you what they would love the product to do. Sometimes they’re right. A lot of times they’re not. But I don’t know that any product that gains a large user base lacks for feedback. So, we got constant feedback. The challenge really was to wade through all of that feedback and find the nuggets of gold that you really wanted to implement.
Andrew: So, what was your process for finding those nuggets before you launched the software, if any?
Pat: Lists. Here’s a list of features and we would sit down and we would prioritize those features. Some we would throw out and say, “We’re never going to do that.” So, it was pretty manual. Even today it’s pretty manual. You just keep lists on your computer. But you still have to sit down and argue out what things are the most important.
Andrew: I see. This whole idea of going to channel partners, as you call them, those consultants, is something that’s so applicable even right now. I can imagine someone who’s competing for business with Infusionsoft, going to Infusionsoft certified consultants and saying, “I’ve got this new software. If anyone’s frustrated with how complicated Infusionsoft is, you might want to tell them about ConvertKit and I will, of course, pay you a percentage of the revenue.”
Here’s another thing that you did. You gave out free demo discs to anyone who went–by the way, you guys had a website pretty early on–anyone who went to your website could get a demo disc, from what I see.
Pat: Yes. With ACT!, when we advertised, we didn’t really sell the product. We sold a video tape demo. They had to pay 1995 to get a videotape demo because there weren’t websites then.
Andrew: Where people could see it. Yeah.
Pat: We would give you a credit for that $19.95 towards the purchase of ACT! or you could even return the video and we’d give you your $19.95 back. It was stunning the tens of thousands of people who paid us $19.95 per videotape. Now, with SalesLogix, the advent of websites had begun and yes, you could try the software. You could request a CD. We would send it to you and you could try it out.
Andrew: I’m seeing more things. This is just me going back into old websites or old web pages. You guys used to do seminars. It looks like in person seminars. Pat Sullivan would come see you March 4th in Chicago, 1998.
Pat: Yeah. Most of those were user group meetings after we had a large user base. Typically, a channel partner or all the channel partners in that city would get together and sponsor a big user group meeting and I would come to town or Mike would come to town and tell everybody about what’s coming and listen to their bitches and moaning and complaints and the things they liked.
Andrew: That makes sense. Was Mike part of SalesLogix too?
Pat: Later on, not initially, but later on he was. Mike was especially great at distribution in Europe and even Asia. So, he focused on taking SalesLogix to primarily EMEA.
Andrew: I’m looking at your old website. It looks like 1998 you guys acquired Opus Corporation, customer support software?
Pat: Yes. CRM began to morph into more than just sales people. It started to include all the customer support people who talked to people and bringing that information into the customer information software, bringing it into SalesLogix. We didn’t have that functionality, so we acquired it.
Andrew: I see. So, that is if someone was answering customers’ email, they should still somehow contribute that knowledge back into the sales department through your CRM.
Pat: Yes. It was very useful for a sales person to know that there’s a support problem that they’re not aware of.
Andrew: I see. What was the big challenge with that business? It seems like things were rolling pretty easily there.
Pat: The biggest challenge was really keeping up with the growth. We went from zero to $108 million in five years. That’s hard to do. Keeping up with that, hiring the right people, having a process to really grow is a challenge, a big challenge.
Andrew: Do you remember where you felt like you maybe couldn’t keep up with that growth? Was there a time?
Pat: Actually, no. We did a pretty good job of keeping up with the growth.
Andrew: You told Jeremy in the pre-interview one of the big challenges was having the guts to persist. What do you mean by the guts to persist?
Pat: Well, it’s a cliché. Startups are hard. They’re harder than hell. They’re the hardest things you may want to do. It seems like it’s easy because you read about the Zuckerbergs and the Sergey Brins and the Bill Gates. We read about the big successes and it seems like it was easy. If you talk to even them, it was hard for them as well. There are many times that you just want to quit. You just say, “Maybe we should just give up.” The ability to persist is probably the number one quality of a successful entrepreneur. There are so many times where it’s just not going the way you’d hoped.
Andrew: When didn’t it work for you? When was it a time that was especially challenging for you? I’m looking here at a resume of a guy who just kept growing and growing. At least to this part in our story, there hasn’t been a big setback. When did you have to have the guts? What was especially challenging?
Pat: Well, ACT! more so than SalesLogix–people would say to us to us, “Gosh, you guys were an overnight success.” They said that three to four years after it started. I would say, “Yeah, we were an overnight success in four years.” Where were you when we were pushing the boulder up a hill and would have to have layoffs because we grew too fast too soon or we were running out of money and a big order at the very last minute saved our butt? It’s just hard. There were lots of times that it’s just hard.
Pat: It’s hard from a personal standpoint. Relationships, culture and company–things can get tense. One person thinks you ought to–Mike would think, “We should do this.” I’d think, “We should do this.” It was always personally difficult.
Andrew: Did you ever punch Mike or did he ever punch you?
Pat: Oh, he’s much bigger and stronger than I am. He was a bodybuilder. I was never stupid enough to do that. But I was a lot faster than him. So, he could never catch me.
Andrew: I think when I was working with my brother, at one point he said, “We should do boxing here as the next activity.” We had done paintball and other stuff. I think it’s because he wanted to punch me in the face. I think he needed an opportunity to do it. You eventually bought ACT!.
Pat: We had developed with SalesLogix. It was a great midmarket product. I got a call from the new CEO at Symantec, John Thompson, who had done a product review at Symantec and he said, “Well, we’re in the security business. We’re in the antivirus business. What the hell is this ACT! thing? Why do we have that?” He ended up saying, “Call that Sullivan guy and see if he wants to buy it back.”
Our fear was they had, in seven years, really screwed it up. And they kind of had. But in our due diligence, we figured out that all it would take would be for someone to really pay attention to it. When we acquired it, it was doing about $30 million. Interestingly when we sold it to them seven years earlier, it was doing $30 million. Within 18 months, it was approaching a $50 million. So, just paying attention to it was all it took.
Andrew: I see.
Pat: What that did from a positioning standpoint, it allowed us to own the midmarket without having to defend a product like ACT!, which was still the dominant product at the low end. I owned them both. So, I could decide a new feature is going to go into ACT! that’s not going to go into SalesLogix or something really belongs in SalesLogix and I don’t have to worry about putting it into ACT!. It turned out to be an awesome strategy.
Andrew: It was, huh? What did you buy it for?
Pat: As I recall, it was about $60 million.
Andrew: $60 million or $16 million?
Pat: $60 million.
Pat: We had just gone public. I didn’t have $60 million. Symantec ended up financing most of that transaction?
Andrew: How do you do that?
Pat: Well, we paid them royalties essentially over a period of time until we reached $60 million, which really didn’t take a long time. So, it worked out really well.
Andrew: Okay. All right, second sponsor and then I want to talk about the next thing that happened with both of those companies.
The second sponsor is a company that I’ve told you about for a long time called HostGator. In a past interview, I was interviewing a guy that said he has software that makes it easy for people to create postcards or letters and it integrates with any software. I said that would be interesting if someone in my audience created a HostGator account, created a website quickly and said, “Anyone who uses my website can send a letter from the website to whoever they want or postcard.”
It would be an interesting little combination. You don’t have to actually use any programmers to do it. You can do it yourself using off the shelf software. This guy, Ed Rifle, heard me talk about that and said, “I want to start a business. I’ve been looking to do this. Why don’t I take this idea Andrew has and I’ll use it as the start of my business. It will be a way for me to experiment.”
So, Ed built the site using off the shelf tools–WordPress hosted by HostGator, which uses Gravity Forms to send the orders over to Lob, which can send out postcards. I think it took him like a week, maybe even less. It was up and running. It was just like an experiment to see if he could do it.
He actually started getting customers. Real Estate people were going to his website to send letters to local potential customers, which was really incredible. The business was doing okay. I don’t know how well it was doing, but he checked in with me soon after to talk about where it should go.
This little hobby actually was going somewhere. I say that because he emailed just yesterday asking for an introduction to a past Mixergy guest, which would be kind of a tough ask, but because I could say to that past guest, “Look what Ed did. He took this idea, put up a website. This guy is a doer. If he’s asking to connect with you, I think you should.” Immediately my past guest said, “Absolutely, I want to meet this guy, Ed, who can turn an idea around that fast.”
So, here’s my suggestion to you if you’re listening to me–if you have an idea in your head, just go and launch it. By doing it on HostGator, you can do it like that. Within minutes, you can get started. HostGator is super cheap. We’re talking about–let me actually see what price they’re offering right now.
You go to HostGator.com/Mixergy and you’re going to get the best price they have. They’re offering $4.87 a month, which is phenomenal, for all the web tools you need to build up your website. We’re talking about easy one-click install of software like WordPress, unmetered disk space, unmetered bandwidth, unlimited email addresses, tech support. At that price, it’s shocking that they would do it because it would cost them so much just to even get a real good tech support person on the phone with you.
But they have 24/7, 365 days a year tech support. They have a 45-day money back guarantee. You can get started quickly and build up that business. Frankly, if you hate your hosting company, you shouldn’t have to stick with them, just go to HostGator.com/Mixergy. You can migrate over to HostGator, get that great support and it will scale with you as you grow your business. I’m grateful to them for sponsoring–HostGator.com/Mixergy. Do like Ed did, get started.
You then bought it, coming back to your story, Pat, and then you sold the business.
Andrew: You were still in charge when the business was sold?
Andrew: You were? Why did you decide to sell it to Sage?
Pat: Looking back on it, it’s one of the big regrets of my life, actually, because Sage screwed it up so bad. They took $108 million and turned it into $50 million in the space of a decade. It’s a shame that a place like Sage would be a place where products go to die. So, it’s frustrating to see your kids not do well in somebody else’s hands. But there were a lot of things going on in 2001. The mania was busting. There were new interests. Microsoft was coming into the space.
Andrew: With Outlook, which was going to add contact management.
Pat: They basically said we’re going to build CRM. They were the big bad kid on the block at the time.
Andrew: You sold before they did that?
Pat: No. They had announced it and it was one of the factors. There were several factors going on. Any time you have a board and you have investors, you have a fiduciary responsibility to do the thing you think is the right thing to do. At the time, there were a lot of reasons to believe that was the right thing to do. And we had two very willing buyers who were bidding against each other. It’s hard to turn down sometimes a lot of money.
You could say to yourself, “If I keep running this, I could really screw it up and be the goat, or I could be the hero right now.” But I really believe had we hung onto it, we would have been much bigger heroes. It’s possible that we would be the Salesforce today or at least the strong number two.
Andrew: I did feel like, again, I wasn’t following it deeply, but I do remember I think I was still in college when I saw Sage buy it and the software, they didn’t get the software. The features were just confusing. Their upgrades just didn’t make sense. It was such a disappointment. Now I see–you went public at one price with a market cap over $200 million. Suddenly your market cap had been chopped in more than half. I understand the pressure of the early 2000s. What percentage of the business did you own at the time?
Pat: That’s kind of personal. But it was, again, around, as I recall, 10% to 13%, something like that.
Andrew: And it sold for $108 million?
Pat: No. $108 million was the peak of our sales. That was our revenue.
Andrew: I see.
Pat: We sold the company for $360 million.
Andrew: I see. Okay. It wasn’t chopped in half. It increased since the IPO. Wow. All right. And then you sell it. Do you remember the feeling after it was gone, after it was no longer yours?
Pat: Yeah. There’s always a certain emptiness when something that you’re passionate about. In this case, I stayed with Sage for 17 months. So, it wasn’t immediate that I felt kind of that loss, although now that you’re working for somebody else, it’s always very, very different. They turned out to be really good people to work for. SalesLogix did well during that period of time. In fact, we became the most profitable division within Sage within that period of time. So, it was a good experience. With ACT! particularly, there’s a certain emptiness that I just lost my baby, my kid went off to college kind of thing.
Andrew: So, there were other businesses since then, but I want to jump over to the one that became Ryver, Contatta. You were looking at the world and realizing that you stopped using ACT!. Why did you stop using ACT! in roughly 2006?
Pat: In 2006 or in 2005, they shipped a total rewrite of the product. It was horrible. It was just a pig. It was incredible slow. It was incredible buggy. They missed some major features that they just didn’t understand the way ACT! really worked. I grew frustrated with it and I said, “I’m not going to use this anymore.”
I began to look at other contact managers. In fact, over the next five or six years, I looked at almost all of the contact managers, CRM systems out there and I didn’t like any of them. I was very biased. I felt like I knew the way a contact manager ought to work. If it didn’t work that way, I didn’t like it.
So, Contatta was started with the idea in mind that I and my cofounders, all of whom had stopped using a contact manager or CRM and basically email was our contact manager, we said this shouldn’t be that way. Email is a terrible contact manager. There ought to be a better way. So, we started Contatta to fix that problem.
Andrew: When you’re saying that you’re using email, you mean you stopped writing notes completely? You would say, “I’m about to meet this guy, let’s go back to my inbox and see what did we say to each other and that’s my refresher and I’ll go in and have the meeting.” That’s the way you were doing business?
Andrew: I see.
Pat: I’m embarrassed to say that I basically lost that habit because it wasn’t an easy way to do it. So, yeah.
Andrew: I agree. I was still trying to use different CRMs and they were awful at the time. I remember going to my friend, Kareem Mine, who is an incredible connector. It felt like he knew everything about the people in his life. I said, “What do you do?” And he said, “I just use Gmail.” And I felt like, “This old way of thinking is not relevant anymore. He’s just going into his inbox. It feels like a lightening of the load. Instead of keeping up with horrible software and writing notes, I’ll just go to Gmail.”
And then I got into that bad, bad habit of just using Gmail. The bad part of that habit is it doesn’t train you to be aware in conversation or write down what people are saying. It doesn’t allow you to go back and see what did you talk about with them. It just trains you to be lazy and go into your inbox, see a big mess, pick out a couple of points and then move on. In a similar way that actually just going to someone’s Facebook and LinkedIn also trains us to be very lazy and not really get to know the person.
So then you had your whole idea that was kind of based on email. It went in one direction. What did you do with that?
Pat: Well, the two things we felt like we could innovate in the CRM space was to build email into the core of the product. The second was to make everything in the system collaborative. Ultimately, we began to feel like the product really wasn’t CRM. It was really a product that fixed four major things broken with emails.
The four things are we tried to use it as a contact manager. We use it as a file manager with attachments. We use it as a task managers when we leave emails in our inbox to remind ourselves to do something. We may even re-email ourselves that email so it’s back at the top of the inbox. And the fourth thing was collaboration with what I call reply all hell. So, we did a good job with Contatta of fixing those four things.
Andrew: So, you’ve created this collaborative email. I’ve seen photos of it. I’ve seen the site and I’ve seen points about it. Can you describe what that looks like? To me, not having used the software but seeing it, it seems a lot like helpdesk software.
Pat: I don’t know that I would describe it like that. I think a better point to talk about would be why did it not work.
Pat: We actually built a stunning product, but once again, we bit off more than we could chew. We didn’t have the funds to market a big game-changing change the email world. We didn’t have the funds to do that. The more we beta tested it, the more we realized we had delivered a seven-course meal but we delivered it all at one time and people didn’t know what course to eat first.
So, we decided to focus on the collaboration part that we did and we pared it down to something much smaller. Once again, just like with ACT!, doing something smaller turned out to be a much, much better idea. Now, the neat thing is I have working all of these other modules that we are going to gradually bring back as add-ons to Ryver and deliver one course at a time.
Andrew: So then the one course was what?
Andrew: Meaning the easy way–kind of like text messaging within groups.
Pat: Correct. What is today, a new category of software, I believe, is team communications. 60% at least of our inbox is emails from our closest team members. All of this reply all and conversations are going on in email. The problem with that is that my most important communication is buried alongside less important, even unimportant emails, so I have to find those in order to keep the conversation going. When all of the conversation exists in a product like Ryver, you know everything there is important. Everything is important. Email, while it’s still important, it’s not as important. I don’t have to live there anymore.
Andrew: So, this has been a conversation that’s been going on there for a while, including with Jason Fried, the founder of Basecamp who was on there who said that messaging within teams is also a problem. I can understand it because you feel like you’re constantly having to respond to people back and forth. They may not be buried in your inbox, but you’re now still going back to them. Because it happens so fast, you have to respond instantly because that’s what people expect. So, how do we do that?
Pat: Well, Jason is absolutely right. It can be a bigger problem, actually, than email because it’s more immediate. It’s something I feel like I need to respond to right now, but like anything it requires a certain discipline to say I’m working on next year’s pro forma and I need to do that in the next three hours. So, you turn it off. You focus. But not everybody has that discipline. So, it can become a very big problem.
The secret that we have found is to have very granular notifications. In other words, I want to be notified only about the things I really, really care about. I can still see the things that are kind of important, but the most important things are going to get my attention. It turns out, the number of things that are really critical typically aren’t that many things. So, as long as you control, set your notifications in a very granular way, it does solve most of that problem, but there is this sense of, “I’ve got to check it. I’ve got to check it.” Or I see a notification come in, I’ve got to do it. There is that problem, no question.
Andrew: How do you compare with Slack?
Pat: Well, I have the dubious distinction of competing against probably the biggest unicorn of the last decade.
Pat: We noticed something both in talking to Slack users and in talking to beta users of Ryver was that if I have to think about adding you to Ryver because I’m going to have to pay $8, I often won’t do it.
Andrew: $8 per user, right?
Pat: Per user per month.
Andrew: I see. You’re saying we have this free group for Slack, for example. If I want to add one other person to it as a guest, I now have to pay for everybody else who’s a part of it, so you don’t add a guest.
Pat: Right. So, team communication works best when nobody has to think about building a team or adding a user. You could build a team now without going to the controllers, the admins and asking permission to build a team that’s going to add to the cost. Often they might say either, “Justify this,” which during the week it takes to justify it, the reason I was going to build a team is over and done. So, I say the hell with it, “I’m just going to use email.”
So, teams tend to stay very, very small. We’re seeing with Ryver teams explode in terms of the size because nobody has to give a hoot about what it’s going to cost. Imagine if I had to pay for you to email me. How stupid is that? Or I had to say, “Well, I need to produce another PowerPoint. I’ve got to get permission.” It’s silly.
If it’s a team product, then whoever is on the team needs to be on it and it needs to be free. We have the advantage in that we have other applications, task management being the first one that’s coming, to sell to those who are using Ryver who happen to need task management tightly integrated with Ryver.
Andrew: I do feel actually that task management and chat have to go hand in hand.
Pat: It’s amazing. You generally are talking about tasks.
Andrew: Right. I’m surprised actually that task management software didn’t take off with chat attached to it. I find that as a team, we do much better communication when we chat about specific tasks, otherwise the conversation gets lost.
Pat: Yes. As it turns out, if you do just team communication, it requires an extraordinarily rich application. If you just do task management, it requires a rich application. But the harder one to do easily, the easiest–
Andrew: The hardest one to is…
Pat: The hardest one to do is team communication.
Andrew: Why? Why is team communications harder than project management?
Pat: There are lots of ways that people communicate. There are a few ways people do tasks. You can adopt a methodology of doing tasks that everybody agrees on and it works, whereas communications is hard. It’s very difficult. If you don’t believe that, ask your wife. It’s hard to accommodate all the different ways that people communicate or even control the amount of communications that they have to respond to.
Andrew: Let me ask you this. Is your Ryver, your team Ryver something you can show us?
Andrew: Yeah? Can you do it? Do you want to turn your screen around and show us how you communicate as a team?
Pat: You got me there…
Andrew: I can show you how to do it.
Andrew: So, let’s have a look and see what we’re looking at. This is the way your team communicates?
Pat: Absolutely. This is our real data. Ryver breaks down into three types of groups, if you will. There are open forums where everybody can see everything. So, we call it all hands, a stream of competitor information flows into here so we keep track of everything our competitors are doing.
Andrew: That’s cool. Zapier sends it over to you because you’ve got a Zapier search and then it’s always in there and you see what people are up to.
Pat: Correct. And then there are private teams. These are teams that only this group can see. As you’ll see here, I have guests and members in this team. Only these people can see the chats, the posts–
Andrew: What’s the difference between a chat and a post for you?
Pat: A chat is kind of an immediate back and forth conversation where a post is a threaded, thoughtful conversation that can take place over days without having to try to find the various chats. It’s like a Facebook wall. So, we have private teams and direct messages.
Andrew: Some private…
Pat: So, this is a private conversation between me and Paul. And then there’s a notification system. This is where the ability to filter in and out the kinds of things that I want to see. So, in forums, I only want to be notified about these two. In teams, I only want to be notified about these. I can still go to the other ones and see it, but they’re not as important to me as these. So, notifications will notify me specifically of just those things.
So, very simply, we have open forums for everybody to see, private teams and one to one direct messaging.
Andrew: I see. I really like the difference between chats and posts, the ability to do a threaded conversation that’s more meaningful than just a quick message board, really helpful. Is there one of those you can show me? There’s a post okay.
Pat: Here’s a conversation about Greg, who happens to be a guest, opened talking about open sourcing and the developer marketplace and there has been this conversation going on for a few days. I might come back two days later and add a comment hat I thought more about this. Hard to do with chat because nobody knows what the context is. Here, you always know the context.
Andrew: That helps so much. The difference is really beyond–first of all, the features of being able to see a threaded conversation. You were talking the Slack format. You were talking about any of these conversations. For me to come and talk to you about that and not have it get lost is incredibly helpful, but also the mindset that we have a chat where we can have lighter conversation and a post where we can go deep into a topic, that’s huge.
Pat: Right. What we find is in one to ones, chat is most often used because it’s easy to keep up with. As the teams get bigger and bigger, post is more often used because it keeps it organized.
Andrew: I can see that. It looks like you also do video. Is that where the start at the top with the groove button is?
Pat: This is Hangouts. We can kick off a Hangout. We also support GoToMeeting. So, if I’m talking to Jeff, if I type in GTM, it sends him a notification. All he has to do is click on that and then he and I are talking.
Andrew: I see. You might want to delete that so you don’t end up getting him that room.
Pat: All I do is tell him it’s a demo and he knows.
Andrew: All right. I’m glad that you showed it to me. I just like to see how people organize their companies. I lie to see things like, “Here’s a place, a special forum where we all get to see what competitors are working on. Here’s another forum where we talk about anything.
Andrew: Cool. Thank you so much for being here.
Pat: You’re welcome.
Andrew: For anyone who’s listening, they can go check it out at Ryver. My two sponsors for this interview are HostGator.com/Mixergy and Toptal.com/Mixergy. And I’m grateful to you for doing this interview with me.
Pat: I Enjoyed it very much.
Andrew: Thank you all for being a part of it. Bye, everyone.
Pat: Bye, bye now.