The Exchanges

Q How old was it at that point? When did the actual company launch?

A The company was founded in 2001, so it had been around quite a long time, and they've done, like, most small business, most, you know, startup software companies, got to four million in revenue, and then couldn't get past it, right, and it was just, like, stagnated at four million for, like, four years, and as a board, we said, hey, we got to do something completely different, and that's kind of when I stepped in. My background is I do a lot of acquisitions. I grow companies pretty quickly that way, so we very rapidly bought two companies. We bought the Act Product, and we bought SalesLogix from Sage, ah, over in the UK. Um, when we, when we bought the company, uh, it was, it was.

AI assessment note: “The company was founded in 2001, so it had been around quite a long time”

Q So how would they use your product? They're using it to get better gas mileage or better route plan or what?

A So in, in the enterprise space, um, the VQ platform, the brand VQ platform has three applications that hang off of it. VQ efficiency, which is one that we're getting the most traction in the market right now. Um, VQ telematics and then VQ safety. So let's, let me talk about VQ efficiency. And what we do there is we actually tune the engine to get the maximum fuel efficiency and the maximum, uh, carbon reduction. Um, we can also set a speed limiters and things along those lines. So a company like Comcast is, is got, you know, that, that portion, they've got our entire platform, but just on that portion alone, they're saving eight and a half million dollars a year on fuel. But more importantly, there's 24,000 metric tons of carbon that they're eliminating from the atmosphere, uh, or from the environment every single year.

AI assessment note: “we actually tune the engine to get the maximum fuel efficiency”

Q Yeah. And help us understand just so people can kind of bucket you appropriately. I mean, should we think of you kind of like a constant contact in terms of like ARPU and customer account and things like that? Or are you kind of more mid market enterprise?

A No, we are definitely, uh, down on the small, uh, small business, uh, area. So when I say SMB, uh, we kind of break it down into four buckets, right? So the first, first bucket is what we call lower, middle, upper, small, right? So those are kind of more of the larger companies in the SMB area, maybe a hundred to a 150 employees, you know, et cetera. And then you get down to the next level is what we call small, uh, which is kind of in that 50, you know, uh, person company range. And then because we're so creative with our names, the next one is small, small, uh, which is kind of like that 15 to 25 person. And then down at the bottom, we call it the IBO or individual business owner. And so, you know, our sweet spot is really in that small to small, small to IBO. You kind of go up a little bit into that lower, lower, middle, upper, small sometimes.

AI assessment note: “we are definitely, uh, down on the small, uh, small business, uh, area.”

Q Now, you know, leveraging and kind of going down each of these spokes you talked about in the stool, those three different ones, um, Have you been able to keep this 20% kind of year over year growth pretty consistent since, you know, call it 2013, 20 12 when you took over?

A Yeah, so a couple of different theories. So we've gone through three distinct, um, eras. We might have talked about this last time. When we acquired the companies, there were distressed assets. We had a lot of work to do. Um, so we need, we went into what we call the transformation era, right? So we had to transform the technology because, you know, when we acquired ACT, it was a closed desktop system. Um, we had to transform the whole back office, the business units, the sales, the channel, et cetera, and heavy, heavy investment. So Think of like the first two years were really the transformation era. And so, no, we were not, we did not have, you know, 20% growth on that. We were, we really try and have two businesses going, transforming the business and then trying to sell licenses and maintenance to keep the business afloat as we were going forward. But then once we got through that, we entered into what we call the conversion era. And back then, this is around May of 2015. Back then, we had about 60,000 customers, and we were like, how do we convert 60,000 customers from using, you know, like, desktop license software and maybe spending some money on maintenance to an open cloud-enabled platform and subscription? Uh, and that's really when, when we started taking off, and we saw significant growth. We got, you know, 15, 20% growth, and then we've been able to sustain that.

AI assessment note: “no, we were not... did not have, you know, 20% growth on that”

Q Since, sorry, sorry, since 20, so from 2015 to 2016, and Onward, you've been able to kind of do 20 to 30% consistently?

A Yeah, I think our 15, 16, and 17, uh, as, you know, conversion era, you know, really good, um, uh, growth rates number. Now we're entering into what we're calling the growth era, right? And so what's the growth era? Three legs of the stool on growth era, right? Number one is there's an enormous amount of opportunity for continued organic growth. We've got a lot of ARPU movers that we can do, uh, as, as we go through. The second stool is really around, um, geographic expansion. We're global, uh, we're, we're around the world, but, uh, Really, six countries really matter for us. U.S. is obviously number one, U.K. number two, Canada is number three, Australia is number four, and then French and German. Um, and so those are our big countries, but if you listen to those countries, you know, we have a little bit of business down in Latin America, so there's huge opportunities in Brazil and Mexico for us, and, um, and there's non, what we call non-act penetrated European countries, uh, that we're, we're going after as well, so that's the second leg of the stool, and, In growth. And then the third is acquisitions, right? Grow, uh, you know, continue to grow through, through acquisitions. And so we're looking for not like 20% growth, but hopefully we can, in the growth era, get into that 25, 30% growth as, as we go forward.

AI assessment note: “Yeah, I think our 15, 16, and 17... really good, um, uh, growth rates”

Q When you say it, what are you referencing act act to the product, right?

A So, uh, it act was actually founded and launched in. Uh, so it's been around a long time. It was like the father of CRM, you know, et cetera. Uh, but it had gotten to a point where it, uh, Sage owned it for a number of years and they really hadn't kept up with the times. It was, like I said, a closed desktop system. Nobody wanted to buy desktop software. Really wasn't, uh, you know, uh, focusing on customers, et cetera. Long story short, we went through this big transformation era. Uh, and at that point I was six foot five and had a full head of hair. And, uh, we kind of worked our way through that. We launched an open cloud enabled platform. So a relaunch of act in, in May of 2015. Uh, and then, you know, really started focusing on conversion, what we call the conversion era, converting. We had, uh, at that point, we had 65,000 customers, uh, on, around the world. In, in, uh, 2015.

AI assessment note: “act was actually founded and launched in. Uh, so it's been around a long time.”

Q How old was it at that point? When did the actual company launch?

A The company was founded in 2001, so it had been around quite a long time, and they've done, like, most small business, most, you know, startup software companies, got to four million in revenue, and then couldn't get past it, right, and it was just, like, stagnated at four million for, like, four years, and as a board, we said, hey, we got to do something completely different, and that's kind of when I stepped in. My background is I do a lot of acquisitions. I grow companies pretty quickly that way, so we very rapidly bought two companies. We bought the Act Product, and we bought SalesLogix from Sage, ah, over in the UK. Um, when we, when we bought the company, uh, it was, it was.

AI assessment note: “The company was founded in 2001, so it had been around quite a long time”

Q Interesting. Okay. Self-funded after kind of the M&A money, or have you raised capital since then?

A Jump Capital has put another couple of rounds in just because they wanted to continue to help fund our growth. Um, and you know, a lot of what we had to do is really fund the transformation of Acton and fund the conversion. So one of the things you need to realize everybody does is as they, as you go through a license and maintenance company and you convert it over to, uh, you know, SAS and subscription. You need an enormous amount of cash on your balance sheet. Uh, and your revenue looks like it's going down. Why? Because you can only, uh, recognize one 12th of the subscription, uh, if it's an annual subscription, et cetera. So all of a sudden your investors are looking at you and they're saying, John, you said this was going to create a whole lot of value. And I was like, yes, guys, it will, but we have to go through the ugliness. Of getting through that transformation. And when I say ugly, oh man, it gets ugly. I mean, you're talking like throw up from your baby ugly.

AI assessment note: “Jump Capital has put another couple of rounds in”

Q Because you got such a steal, they couldn't tell everyone how big of a steal they gave you, huh?

A They couldn't, and listen, I came from publicly traded company backgrounds too, so I knew exactly the game they were playing, but I will tell you that, um, yeah, I mean, we've got, we've got two companies, uh, basically, you know, they, they were distressed assets, so it was really easy to, uh, to, to, to pick them up. Um, now I will tell you that we divested off SalesLogix to Infor in 2014, uh, so about a year after we, we acquired them, and I was able to divest, uh, Infor, or SalesLogix offer one and a half times what I paid for both Uh, the companies, uh, when I bought them together. So it was, uh, it was a lot of fun.

AI assessment note: “They couldn't, and listen, I came from publicly traded company backgrounds too”

Q Yeah. And help us understand just so people can kind of bucket you appropriately. I mean, should we think of you kind of like a constant contact in terms of like ARPU and customer account and things like that? Or are you kind of more mid market enterprise?

A No, we are definitely, uh, down on the small, uh, small business, uh, area. So when I say SMB, uh, we kind of break it down into four buckets, right? So the first, first bucket is what we call lower, middle, upper, small, right? So those are kind of more of the larger companies in the SMB area, maybe a hundred to a 150 employees, you know, et cetera. And then you get down to the next level is what we call small, uh, which is kind of in that 50, you know, uh, person company range. And then because we're so creative with our names, the next one is small, small, uh, which is kind of like that 15 to 25 person. And then down at the bottom, we call it the IBO or individual business owner. And so, you know, our sweet spot is really in that small to small, small to IBO. You kind of go up a little bit into that lower, lower, middle, upper, small sometimes.

AI assessment note: “we are definitely, uh, down on the small, uh, small business, uh, area”

Q Interesting. Last question. Do you use conference sponsorships as a means to drive growth or no?

A We don't actually. Um, we, we don't do that. We do, we do hold an annual conference ourselves for all of our ACCs. Uh, and it's usually in the, uh, late October, early November timeframe down in, uh, in Scottsdale. And we get probably about 50% of our ACCs will make the trek from around the world to, to come in. And that's, that's, think of it. They're almost like our, our, uh, an external sales force or like one of our own. So That's kind of getting them together, getting, uh, getting them up to speed on what, you know, how they did in the year, what's coming up in the next year, getting them all fired up, getting, handing out awards and, and that kind of stuff. And, uh, and it's a really good, a really good time.

AI assessment note: “We don't actually. Um, we, we don't do that.”

Q Interesting. Okay. Self-funded after kind of the M&A money, or have you raised capital since then?

A Jump Capital has put another couple of rounds in just because they wanted to continue to help fund our growth. Um, and you know, a lot of what we had to do is really fund the transformation of Acton and fund the conversion. So one of the things you need to realize everybody does is as they, as you go through a license and maintenance company and you convert it over to, uh, you know, SAS and subscription. You need an enormous amount of cash on your balance sheet. Uh, and your revenue looks like it's going down. Why? Because you can only, uh, recognize one 12th of the subscription, uh, if it's an annual subscription, et cetera. So all of a sudden your investors are looking at you and they're saying, John, you said this was going to create a whole lot of value. And I was like, yes, guys, it will, but we have to go through the ugliness. Of getting through that transformation. And when I say ugly, oh man, it gets ugly. I mean, you're talking like throw up from your baby ugly.

AI assessment note: “Jump Capital has put another couple of rounds in”

Q Will you IPO in 2018 or 2019 to help fund these acquisitions if you don't go the traditional fundraising route?

A I don't think so. You know, I've, I've taken two companies public, uh, been there, done that, rang the bell on New York Stock Exchange. Uh, you know, there's, there's only a, there's, there's, there's really two reasons why you need to go, want to go public. One is you need liquidity and we don't need liquidity right now. And number two is currency, right? Do you need currency for acquisitions? I actually think that we'll go and, and we'll find, uh, a capital partner, uh, and, and start, uh, going down that path and really get into the hyper growth mode. And then we'll make a decision, you know, probably a little bit later on is, you know, how do we, how do we get some liquidity after that?

AI assessment note: “I don't think so. You know, I've, I've taken two companies public”

Q Interesting. Last question. Do you use conference sponsorships as a means to drive growth or no?

A We don't actually. Um, we, we don't do that. We do, we do hold an annual conference ourselves for all of our ACCs. Uh, and it's usually in the, uh, late October, early November timeframe down in, uh, in Scottsdale. And we get probably about 50% of our ACCs will make the trek from around the world to, to come in. And that's, that's, think of it. They're almost like our, our, uh, an external sales force or like one of our own. So That's kind of getting them together, getting, uh, getting them up to speed on what, you know, how they did in the year, what's coming up in the next year, getting them all fired up, getting, handing out awards and, and that kind of stuff. And, uh, and it's a really good, a really good time.

AI assessment note: “We don't actually. Um, we, we don't do that.”

Q Will you IPO in 2018 or 2019 to help fund these acquisitions if you don't go the traditional fundraising route?

A I don't think so. You know, I've, I've taken two companies public, uh, been there, done that, rang the bell on New York Stock Exchange. Uh, you know, there's, there's only a, there's, there's, there's really two reasons why you need to go, want to go public. One is you need liquidity and we don't need liquidity right now. And number two is currency, right? Do you need currency for acquisitions? I actually think that we'll go and, and we'll find, uh, a capital partner, uh, and, and start, uh, going down that path and really get into the hyper growth mode. And then we'll make a decision, you know, probably a little bit later on is, you know, how do we, how do we get some liquidity after that?

AI assessment note: “I don't think so. You know, I've, I've taken two companies public”

Q Okay, good. That makes sense. Six month payback. Um, And are you getting, by the way, I'm curious, from the private equity firm, are you getting any pressure to drive that, uh, that payback period longer? They're saying, look, we have cash. Pay two bucks to win the customer.

A No, no. Actually, uh, so, uh, one of the things that has happened since our last conversation, I think back, back in our last conversation about a year ago, we were still, uh, you know, owned by the institutional investors that I was, was talking about, and 62% was owned by, you know, the common, you know, et cetera. So in May of this year, we, uh, we actually recapped the company. And brought in a whole new set of investors. And we're able to take out the entire existing investor base and the founders and everybody got a really, really nice return. Everybody was very, very happy. But we brought in SFW Capital based out of New York. And these guys, you know, the majority owners of the company right now, fantastic partners to have. They understand SMB really, really well.

AI assessment note: “No, no. Actually, uh, so, uh, one of the things that has happened”

Q Now, you know, leveraging and kind of going down each of these spokes you talked about in the stool, those three different ones, um, Have you been able to keep this 20% kind of year over year growth pretty consistent since, you know, call it 2013, 20 12 when you took over?

A Yeah, so a couple of different theories. So we've gone through three distinct, um, eras. We might have talked about this last time. When we acquired the companies, there were distressed assets. We had a lot of work to do. Um, so we need, we went into what we call the transformation era, right? So we had to transform the technology because, you know, when we acquired ACT, it was a closed desktop system. Um, we had to transform the whole back office, the business units, the sales, the channel, et cetera, and heavy, heavy investment. So Think of like the first two years were really the transformation era. And so, no, we were not, we did not have, you know, 20% growth on that. We were, we really try and have two businesses going, transforming the business and then trying to sell licenses and maintenance to keep the business afloat as we were going forward. But then once we got through that, we entered into what we call the conversion era. And back then, this is around May of 2015. Back then, we had about 60,000 customers, and we were like, how do we convert 60,000 customers from using, you know, like, desktop license software and maybe spending some money on maintenance to an open cloud-enabled platform and subscription? Uh, and that's really when, when we started taking off, and we saw significant growth. We got, you know, 15, 20% growth, and then we've been able to sustain that.

AI assessment note: “We got, you know, 15, 20% growth, and then we've been able to sustain that.”

Q you have a huge volume of these. You call them, I think, IBOs, the small, small, or smaller, smallest thing. But if you have millions of these folks and you add a dollar of ARPU or three dollars of ARPU, it's a meaningful mover. Uh, are you, is that kind of along the lines of what you're thinking with adding another marketing kind of tool on as it's an upsell?

A Yeah, absolutely. So, think about it a couple different ways. So, in our portfolio of products, we have two distinct platforms. call it the premium platform, and then we call it the ACK-C-A-A-A-A-C-C-C-A-A-A-C-A-C-A-A-A-A-A-C-A-C-A-C-A- So now if you take a look at that and you say, okay, now if you add, you know, 200 to 300 bucks a month for marketing automation on top of that, you do the math, right? Holy smokes. That just, the growth goes off the charts. Uh, so, you know, so the premium platform, and that's really geared towards that small, small, small, and then, you know, touching on that lower, lower, middle, upper, small area is really the sweet spot on that platform. But like you said, there are millions of these IBOs and small, smalls, uh, that are out there. So then we created this platform called Act three 65. And what is that? It's basically, uh, it's a, it's a very light, uh, kind of, uh, uh, CRM slash marketing automation. It has great customer management. It's got fantastic opportunity and pipeline management. It's got email marketing built into it, and it's also integrated with Office three 65. All of that for 10 bucks a month, right? People spend more than that in Starbucks, for gosh sakes. You know, invest 10 bucks a month to grow your business. Um, and so that's really geared to go after and scoop up those millions and millions of these IBOs, not only in the …

AI assessment note: “Yeah, absolutely. So, think about it a couple different ways.”

Q Okay, good. That makes sense. Six month payback. Um, And are you getting, by the way, I'm curious, from the private equity firm, are you getting any pressure to drive that, uh, that payback period longer? They're saying, look, we have cash. Pay two bucks to win the customer.

A No, no. Actually, uh, so, uh, one of the things that has happened since our last conversation, I think back, back in our last conversation about a year ago, we were still, uh, you know, owned by the institutional investors that I was, was talking about, and 62% was owned by, you know, the common, you know, et cetera. So in May of this year, we, uh, we actually recapped the company. And brought in a whole new set of investors. And we're able to take out the entire existing investor base and the founders and everybody got a really, really nice return. Everybody was very, very happy. But we brought in SFW Capital based out of New York. And these guys, you know, the majority owners of the company right now, fantastic partners to have. They understand SMB really, really well.

AI assessment note: “No, no. Actually, uh, so, uh, one of the things that has happened”

Q So they, why do they make a connection and say, well, this XCRM and sales automation guy will be a great Thing to put on derived systems. How did that connection happen?

A You know, it's, it's about leadership, uh, quite frankly, uh, you know, if you look at derived systems, derived systems has been around for a long time, so it's not a startup. It, it, it actually, uh, GEF launched this in, it was a combination of a, of a couple of different companies coming together. So I'll, I'll, I'll give you that story here in a second, but, um, You know, it had gotten to a point where it had lost its way. And, you know, what I'm known for is a leader that comes in rapidly understands what's going on rapidly understand what needs, what needs to be done to fix it. And then more importantly, rapidly putting in place a plan to grow it, uh, and, and, uh, increase value. And so, you know, that that's how they came up, uh, across me and they said, you know, are you up to the challenge? And I said, oh my God, absolutely. Uh, this, this is, uh, this a lot of fun, but, um, you want me to give you the 32nd, uh, history on, on Derive?

AI assessment note: “what I'm known for is a leader that comes in rapidly understands what's going on”

Q So they, why do they make a connection and say, well, this XCRM and sales automation guy will be a great Thing to put on derived systems. How did that connection happen?

A You know, it's, it's about leadership, uh, quite frankly, uh, you know, if you look at derived systems, derived systems has been around for a long time, so it's not a startup. It, it, it actually, uh, GEF launched this in, it was a combination of a, of a couple of different companies coming together. So I'll, I'll, I'll give you that story here in a second, but, um, You know, it had gotten to a point where it had lost its way. And, you know, what I'm known for is a leader that comes in rapidly understands what's going on rapidly understand what needs, what needs to be done to fix it. And then more importantly, rapidly putting in place a plan to grow it, uh, and, and, uh, increase value. And so, you know, that that's how they came up, uh, across me and they said, you know, are you up to the challenge? And I said, oh my God, absolutely. Uh, this, this is, uh, this a lot of fun, but, um, you want me to give you the 32nd, uh, history on, on Derive?

AI assessment note: “what I'm known for is a leader that comes in rapidly understands”

Q And are you looking for distressed assets or high growth companies?

A You know, well, there's, again, I'll go back to three buckets. We're looking for either technology acquisitions. They could have, you know, great technology, no customers when they're trying to figure out how to sell it. And, you know, you can kind of pick those up, uh, relatively cheap because then they can come along for the ride. Um, bar poo drivers, uh, somebody that has, uh, you know, good technology customers, uh, and, uh, you know, are looking to, um, uh, you know, another way, another channel to, to sell their software. Uh, and then when you look at the verticals, you know, that's really about, you know, something big and transformational, uh, if you would. Now, a vertical, it could, that could be a distressed asset. I mean, it could be somebody that's got a really, uh, deep knowledge of the vertical, a really good following, but maybe their technology isn't really, uh, where it needs to be, you know, et cetera. So, Um, so yeah, that, I mean, that's, that, that's the fun part now is to try and figure out, you know, how to make all that happen.

AI assessment note: “there's, again, I'll go back to three buckets. We're looking for either technology acquisitions.”

Q there. You're now profitable, growing 20% year over year, cash flow positive. Where's your head at? I mean, do you, one of the things I always wonder about folks like you You could do anything you want. You're working now instead of private equity firm. At some point you like stop learning, right? And then usually people end up leaving and starting something new. Where are you at right now?

A Yeah, so I'll tell you what we're doing. We took a half a step back, and I think we might have talked about this last time, and we really have looked at the SMB industry, uh, and we said, hey, you know what? We believe that the SMBs, there are four digital pillars that they need in order to grow. We call them presence, traffic, conversion, retention, and optimization tools. Presence, everybody knows what that is. Websites, et cetera. Traffic drives traffic to the presence. That creates lead. Conversion retention is all about converting leads to customers, retaining them and growing them. Optimization tools are things like financial software, payment software, you know, HR software, etc. So we, we are going to basically, uh, own conversion and retention for the SMB. We were dabbling in it when we were a little small email marketing company. Then we acquired, you know, CRM. Uh, we're, you know, big, big, uh, here's big news. Uh, so this is exclusive just for you. Nobody else knows about this, but man, we're, we are going heavy into the marketing automation. We're launching, um, act the next generation, uh, on November the seventh.

AI assessment note: “Yeah, so I'll tell you what we're doing. We took a half a step back”

Q there. You're now profitable, growing 20% year over year, cash flow positive. Where's your head at? I mean, do you, one of the things I always wonder about folks like you You could do anything you want. You're working now instead of private equity firm. At some point you like stop learning, right? And then usually people end up leaving and starting something new. Where are you at right now?

A Yeah, so I'll tell you what we're doing. We took a half a step back, and I think we might have talked about this last time, and we really have looked at the SMB industry, uh, and we said, hey, you know what? We believe that the SMBs, there are four digital pillars that they need in order to grow. We call them presence, traffic, conversion, retention, and optimization tools. Presence, everybody knows what that is. Websites, et cetera. Traffic drives traffic to the presence. That creates lead. Conversion retention is all about converting leads to customers, retaining them and growing them. Optimization tools are things like financial software, payment software, you know, HR software, etc. So we, we are going to basically, uh, own conversion and retention for the SMB. We were dabbling in it when we were a little small email marketing company. Then we acquired, you know, CRM. Uh, we're, you know, big, big, uh, here's big news. Uh, so this is exclusive just for you. Nobody else knows about this, but man, we're, we are going heavy into the marketing automation. We're launching, um, act the next generation, uh, on November the seventh.

AI assessment note: “Yeah, so I'll tell you what we're doing. We took a half a step”

Q Has your, has your kind of, you know, small and smaller kind of ACVs, have they increased since twenty-fifteen or no? Most of your growth has come from adding additional customers. I think you said 60,000 in twenty-fifteen and now you mentioned you're at 84,000.

A Yeah. So, um, I think, uh, well, we've done a couple of things. One is we've had people that, uh, used to use act like 20 years ago that all of a sudden have said, oh my God, that just back, you know, et cetera. So they've come back, uh, and we call those legacy, uh, users. So we've seen, uh, you know, so an upgrade in there, but we've also seen a lot of net new, right? So we've been penetrating into different segments of the market. Um, you know, it's funny. Anybody over 40 knows act, knows of somebody that has used act, Anybody under 40 can't spell act, right? So we have, you know, so there's, there's, there's positives and negatives associated with that. And so the positives is, is that it's, it's a very well recognized brand. Uh, the negatives is, is that man, it's been around a long time. Is it old software? You know, et cetera. Now you get to this segment of people that never even heard of act before. You don't have any of that baggage. You can go right after them and say, Hey, this is, you know, this is what you need to grow your business.

AI assessment note: “we've also seen a lot of net new, right?”