DecisionPoint had just experience what could be called “strike two” in its attempt to get off the ground. First, a large company had decided not to acquire DecisionPoint. Second, a management team that was hopeful in taking over and running DecisionPoint had to back out because of lack of exclusivity they felt was needed to solidify the market for DecisionPoint’s products. Up until this point, I had remained fairly optimistic that we could make a go of it. However, after the second strike, doubt started to creep into my mind. Could we find the right management team? Could we secure appropriate financing to give us the start we desperately needed? Or, would we have to become yet another startup that failed to get off the ground? These were all questions that ran through my mind on a regular basis. I certainly had a lot of doubts at the time.
While DecisionPoint was going through several ups and downs, there was another side story going on at Sequent that DecisionPoint would eventually benefit from. One of Sequent’s first individuals to get involved in the marketing and partnerships in the data warehouse space had decided to leave Sequent to take his career in another direction. About the time the management team backed out of running DecisionPoint, this individual decided that leaving Sequent and the data warehousing market to pursue a new career was a mistake, and he wanted to return to what he loved doing. One of our angel investors had maintained contact with that individual, and when that individual decided he wanted to return to data warehousing, our angel investor hooked him up as our next CEO.
This individual not only knew the market we were in, but was well known as a creative thinker with innovative ideas within the data warehousing market. Additionally, he was a very dynamic speaker and presenter, which would help DecisionPoint get into places we had not been before. In many ways, I was relieved when this individual came on board. While I didn’t always agree with his decisions and actions when he was part of Sequent, I knew he would bring a lot of value to our team. I finally felt I would not have to be the only one to carry the torch for DecisionPoint to people outside of the company.
Our first mission, once this individual came on board was to start ramping up the process of selling DecisionPoint. Sequent was becoming impatient with our inability to sell to more customers even though we were going through a very rocky period. Sequent wanted signs that we could make a go of DecisionPoint by proving that we could close some new customer accounts. The push from Sequent was natural, but it also complicated things for many of us on the team. We didn’t have a whole lot of formalized collateral on the product, we didn’t have a formal pricing strategy on it, we didn’t have the appropriate legal contracts in place, and we had no sales proposal process along with the related documents. We were going to have to build a lot of this on the fly, and a lot of it fell on my shoulders as I was in the best position to understand the product along with the customers, which meant I had the deepest background on how the documents should look to customers. Fortunately, Sequent gave us a lot of help and support in this area, especially with legal agreements and contracts, which we could have never developed on our own.
The good news is that we had made some early traction with three large retailers, and a service based company. We were coming to the end of our fiscal year, and we desperately needed all four deals to close, and they did…literally on the last minute of the last day of the year. Two of the retailers were fairly simple to close as we made connections via the Sequent sales force. That’s not to say it was a completely done deal when we were introduced to them. We had a lot of work to do to close the deals. However, having the initial introduction and contacts made for us was a big head start.
We were able to gain access to the third retailer via an IT person that I had worked with at Sequent, who had left Sequent to go work for the retailer. He made the initial introductions for us, and we were able to make the right contacts within the account in order to make several presentations. At that time, that retailer’s information technology (IT) department was very distributed, which worked to our advantage. Many of the groups within the retailer didn’t have the money to buy our solution. However, a group out of the Canadian operation had a manager that was desperately looking to be the first to do something new within the retailer and he was pretty creative with the whole budgeting/financing process. He would be the first to implement DecisionPoint, which would lead to a global site license of DecisionPoint with the retailer. Eventually, DecisionPoint would be implemented at fourteen different sites within the retailer. The site license deal was a steal for the retailer and we desperately needed the business. Hindsight being 20/20 once again, we should have negotiated a better deal. But, given where we were at, we didn’t have a lot of time to negotiate and the retailer used that to their advantage.
The service company was a bit of a surprise for DecisionPoint as we didn’t really have connections into that company. However, a driven sales team in the Midwest (Chicago) pushed into the company and made enough progress to give the customer confidence in our ability to deliver. The company had a fairly small operation, so the amount of money they would have to spend for the DecisionPoint software was at a level that would not draw any attention if the implementation of DecisionPoint failed. So, they were able to take a small risk implementing software from a very small software startup.
Our CEO and I put our heads together and came up with a bold sales and marketing strategy about the same time all of this customer activity was going on. A typical data warehouse implementation was often categorized as “2-2-50” by analysts in the data warehousing industry. The categorization meant that the average data warehouse project took two years and two million dollars to complete, and at the end of the project, there was only a 50% chance that the data warehouse implementation would bring any level of benefit to the business. That was a very high risk proposition, which caused many companies to not even consider a data warehouse implementation.
DecisionPoint was built with a full set of integrated data warehousing tools along with the concept of pre-configuration of the data warehouse, which was unheard of in the industry. We called this concept a “Source Expert”. We had determined that by targeting our data warehouse solution at customers with specific source applications, we could pre-configure 75% of the data warehouse for those customers with minimal implementation effort and before we ever stepped on the customer site. However, we took this one step further. For the 25% that could not be pre-configured, we came up with software that would read how the source application was configured for the customer, and automatically re-configure the data warehouse environment based on the source system configuration. There would again be minimal implementation effort as all of it was done in software.
This capability within DecisionPoint allowed us to come up with two groundbreaking concepts within the data warehousing industry. First, we came up with the concept of a proof of concept where we would implement the DecisionPoint solution at the customer’s site within two weeks. Second, as an extension of the proof of concept, we instituted a try before you buy concept where after the proof of concept, the customer would have several weeks to run and evaluate the solution at which time they could decided whether or not to buy the solution.
As far as the proof of concept goes, we couldn’t have been happier with the results. At the end of the two week implementation, end users at the customer site could start using the solution just like it was a full production implementation. The reason we implemented the proof of concept was because we were completely breaking the mentality of the data warehousing market. Every customer was painfully aware of the “2-2-50” phenomenon, and they were baffled how our solution could be implemented so quickly and completely in a small fraction of the time of any other data warehouse solution available on the market. Our goal was to completely shatter the previous mentality associated with the data warehouse market, and it worked.
The try before you buy concept did not go nearly as well. We didn’t plan well enough, and so we went into many try before you buy situations with a lot of faith that if we did what we said, customers would naturally buy from us. As a result, we didn’t put a lot of rules or legal agreements in place that would bind the customer to buying the solution after we were successful. Additionally, we didn’t charge for the proof of concept or try before you buy program, so it was difficult to differentiate between the customers that really wanted the solution versus those that were just testing the waters. We had a lot of customers back out buying the solution as a result of the try before you buy program even though in every situation, we had successfully implemented our solution for them. It was both a painful and costly lesson. Over time, we would develop more stringent rules for the try before you buy program along with charging the customer for the time we spend implementing the solution and the appropriate legal agreements and commitments from the customer. Even with those things in place, our proof of concept to close ratio was terrible.
At this point, customers that we had closed at the end of the year were starting to complete the implementation of our solution and starting to see real benefit from the implementation. We had some really good success stories, including one of our retailers that started closing unprofitable stores after looking at the financial information that we showed them for their stores. We were only two weeks into the implementation, and the solution had not been fully implemented, but the customer was already using it to make critical business decisions. It was really cool and really scary at the same time. Our solution was working as advertised, but created an interesting dynamic within this retailer as far as how long they were willing to let an unprofitable store recover. It was at that point I realized how cut throat the retail industry was. Profit margins are slim at best, so if there was a store that was not performing, they didn’t have a lot of time to make it profitable and they would close it to stop losing money at that location. Our goal was to help companies make better business decisions to make them more profitable, but it wasn’t necessarily our intention that would be done by scaling down operations so radically. We certainly did not want to be known as the company whose software caused stores to close or get people fired. We would have to fight that image on an ongoing basis from this point on.
By all accounts, things were going well for DecisionPoint. With our new found success, we were starting to attract more attention from investors that wanted to put money into DecisionPoint so that we could grow the business faster. Additionally, we were starting to sell the solution to companies that had never bought software from a startup ever before. These were huge, international, organizations that had a lot to risk, and yet they were taking that risk to implement our solution with hopes it would bring them the same value that our other customers achieved. While the implementations did have some bumps along the way as most do at some point, we were successful overall. At the time, it seemed like nothing could stop us. We were going to take the data warehousing market by storm by changing the game on the established data warehousing software providers and establish a trend that our competition would have a tough time keeping up with.
Many people often say that it’s never as bad as it seems and it’s never as good as it seems. Unfortunately, at DecisionPoint, it was good, but definitely not as good as it seemed. Three critical events would occur that would present a huge problem with DecisionPoint’s ability to grow as a company. The first two events would not necessarily be viewed as negative on their own merit. However, they would contribute to the third event, which would pose huge problems for DecisionPoint’s future.
The first event was that Sequent was in the process of being acquired by IBM, and to IBM, DecisionPoint was like a wart on Sequent’s butt that IBM wanted no part of. While DecisionPoint was starting to become self sufficient, we always had the Sequent backing in the event that something went wrong. IBM was unwilling to continue that relationship. They insisted that DecisionPoint go out and seek additional investors that would provide DecisionPoint with enough operating capital that the relationship with Sequent and IBM could be terminated. This meant that we would have to scramble to find the additional funding. Behind the scenes, we had continued to seek additional investors, but now it was an urgent priority, and we only had a couple of months to get something done.
As an aside to all of this, we did have one very funny event that happened as a result of this process. Sequent had provided DecisionPoint with quite a bit of money to keep operations moving. Additionally, DecisionPoint had brought on a brash new CFO that was a master at managing money. During the negotiations with IBM, at one point, the IBM representative asked what DecisionPoint intended to do about paying accrued interest on the loan that Sequent had provided us. Without even thinking or flinching, our CFO raised his middle finger at the person from IBM, which was basically a sign that if IBM was expecting interest to be paid, it wasn’t going to happen. It wasn’t the most appropriate response in that setting, but it gave us a story that all of us laugh about to this day.
Getting back to our story, the second event that happened was a result of the first event. Because of everything going on with IBM and our critical need to find other financing, one of our angel investors connected us with a large European telecommunications company that was willing to provide financing to DecisionPoint. At the time, it was before companies like telecommunications, cable, and satellite service providers were providing internet service. They were all looking to get into the business, but needed a good first step.
To the European telecommunications company, we represented a way for them to get that first step into what was known as the data center outsourcing business. At a high level, that business is designed so that the telecommunications company would run the computer systems of other companies on a site that the telecommunications company provided and managed. Given that our solution was very fast and easy to implement and support, it was a way for the telecommunications company to get into the business known as outsourcing without having to make a huge up front investment in people and training. They could focus their attention on the computers and facilities, while at the same time implementing a solution quickly that customers would get a lot of value out of without a lot of human costs
This lead to the second event mentioned above, which was that the large European telecommunications company became our first real investor. As part of the investment, DecisionPoint established a partnership with the telecommunications company in the data center outsourcing business. To make things even more complicated, the telecommunications company was running the software that DecisionPoint supported, so they also became a customer. And, over time, they would become one of our largest customers worldwide. Eventually, the partnership in the data center outsourcing business would dissolve. However, to this day, that large European telecommunications company remains one of our largest and most loyal customers. It’s been very interesting to watch the relationship evolve.
As I said before, as a combination, these first two events weren’t necessarily a bad thing. The relationship with Sequent was being ended by IBM, but we did manage to find an investor that would help us continue to do what we needed to do. In fact, if memory serves, they invested close to $20 million in DecisionPoint. A percentage of that money went towards paying off some of the bills we had put on hold during the transition from Sequent/IBM to having our own cash. It was definitely a relief to get those bills paid and taken care of as the vendors were starting to worry if we would ever pay them. Even after that, we still had a pretty substantial amount of money in our bank account.
However, this would lead to the third event, which would become a problem. We were very much in the same situation as a person that was starving, and then suddenly put in front of a large buffet table to eat as much as they could. For a long period of time we had gone along “starving” ourselves to do what we needed to do to stay alive. Now, we were like that starving person. We had all of this cash to do what we had never been able to do before. We had a lot of plans and great ideas that had been on hold, and we wanted to start pursuing those ideas. But again, like a starving person, rather than have a methodical plan of attack, we started sampling a little bit of everything from our “idea buffet”. This lead to a spending spree, and that became a huge problem.
For a long period of time, we had been very careful about the people we had hired. Now, we started to re-organize, and began hiring at a break neck pace. Some of the hires were field sales and consulting resources, which were desperately needed to try and land more customers. However, a lot of the new hires were in the engineering organization. We would come up with a new idea for a new product line, and then hire engineers to build that product line. We did this without any market research into who our competition would be, or what the potential sales revenue would be. We simply believed that if we built it, we could out maneuver the competition, and achieve enough customer sales to sustain the new product line. Nothing could have been further from the truth. We were extremely disorganized, and we ended up with a lot of half finished products that were never sold, and engineers that weren’t necessarily needed.
In the course of a couple of months, we had hired so many people that we not only filled the office space that we originally leased, but we also leased space on another floor in the same building plus another floor in an adjacent building. At the time, it was extremely baffling why we couldn’t complete more products in a faster period of time. But, looking back on the situation, we were again like the starving person at the buffet table. While the starving person gorged themselves on food until they were too full to move, we gorged ourselves on new employees to the point where we couldn’t move in any product direction easily. There were a lot of ups and downs, and a lot of employees that were only around for a couple of months.
We did end up hiring a VP of Human Resources and a recruiter to help get some sanity to how we were hiring, how we were deciding to pay people we were hiring, and many other things. It definitely helped, but was not a cure to our problems. It just brought some organization to what we were trying to do from a staffing perspective. It was also at that time that we decided that we needed to move to a new facility where we could get all of the employees into one floor on one building. It was also at that time that we started to realize that we were spending money faster than we could sustain, and that we weren’t closing new customer sales at a rate that we needed to sustain the spending levels. Our first meeting about cutting spending wasn’t terribly difficult as there were some marketing programs that we could put off, and there were some open job requisitions that we would not hire people for. This seemed to offer short term relief to our fears.
Shortly after we moved into our new facility, things started to unravel pretty quickly. The first event wasn’t necessarily a business event, but was emotionally traumatic. Our VP of Human Resources, who was a man, found out that his breast cancer had returned. I never knew that a man could get breast cancer, but it does actually happen even though it’s rare. He had several previous battles with breast cancer, and beat them all, but this seemed to be a more severe case of the disease this time around. Eventually, he would have to leave DecisionPoint to focus his efforts on his battle with breast cancer. Again, it wasn’t a business event, but it had an emotional impact on the entire organization. He was a wonderful person, and an excellent VP of Human Resources. Unfortunately, he would pass away shortly after he left DecisionPoint. He was a fighter, and wonderful person. A disease so awful should not strike someone who is as wonderful as him.
We also reached a point where we were starting to run low on cash, and our sales weren’t picking up as quickly as we had hoped. We had reached approximately 120 employees at the time, so there was no easy way out of the difficult situation. It became so critical that we were dependent on one customer making their payment on time in order for us to be able to pay our employees. In the management team, there was a lot of nervousness and frustration. No matter how we looked at the situation, we were going to have to layoff employees. This would not be a small layoff, but a significant cut in staff. We had grown so fast, and ended up in a new facility to handle the new staff. Now, we were in the new facility and cutting staff, so we really would have been ok in our previous facility. It was a serious twist in events.
I think of all of the things you have to do as a manager or high level executive, the hardest thing to do is terminate hard working employees for reasons that had nothing to do with them. The only way to describe it is very simply that it stinks. The sole redemption for me was that I didn’t have to personally lay anyone off. It was still difficult as I had formed bonds with most of the employees, and I felt obligated to say goodbye to all of them. They were all pretty good spirited about their situation, but it was still tough knowing that we were letting them go, and they had to scramble to figure out where they were going to go and what they would do next.
We did give ourselves some breathing room as far as cash goes, but we would have to run DecisionPoint in a very Spartan manner. We could only spend money we absolutely had to spend, which meant that we could only spend money related to closing new customer business. Additionally, the DecisionPoint board decided that it was time to start looking for a new CEO. Our CEO did a fantastic job getting us off the ground, but he had limited experience in taking the business to the next level of growth, which was emphasized by how quickly we grew and then shrank again. The goal was to bring in a CEO that had the experience to take DecisionPoint to the next level.
Our current CEO continued on with his role in the company, and did his best to help us move forward. However, we were continuing to struggle in sales and cash was still dwindling. It was clear that we were headed for another round of layoffs regardless of what we did. Eventually, we made the decision to have the layoffs. Unlike last time, I actually had to lay off one of my employees this time. He was a great programmer, who really knew what he was doing and worked as hard as anyone could have asked. It was a painful discussion, and while he understood the reasons, it was still difficult to let him go. He had done everything I had asked and more. After my discussion with the employee and a post-layoff company meeting, I went home to spend some time by myself and contemplate what had happened. I felt absolutely horrible, and like I had let the employees down for not doing a better job with the rest of the management team to prevent what was happening. I still carry some guilt about that today. I look back and think about all of the things that could have been done or all of the different choices that could have been made. I know that you can’t change the past, but I was determined to examine the past and be able to use the lessons from the past as a guidance for how or how not to do things moving forward.
We were slowly skidding towards the end of DecisionPoint, but there was still time to make some changes and get going again, and that’s what we were determined to do.
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