Sramana: Once you started Pragmatic Works who were your first customers?
Brian Knight: I went after a few customers around town. I provided consulting services just to build the capital in the account. I would sell a consulting job for a certain price and take 30% of that revenue and re-invest it into the company. It was a very informal model at first but I did it that way to ensure I could build capital to enable development of our software product.
Many software companies start out by offering a consulting service first. We followed that model because we needed capital. However consulting is like a drug you can’t get off of. Once you get good at it, you don’t want to give it up.
Sramana: What kind of consulting work were you doing for your customers?
Brian Knight: It was all business intelligence, SQL Server work. That helped us to eventually build our tool suite. All the stuff that I was doing manually took hundreds of hours. However, I learned the patterns and used that to develop software tools that could reduce hundreds of hours of work into two hours of work.
Sramana: How many consulting clients did you have early on before you had your software tools developed?
Brian Knight: We had a few dozen customers at that time. I hired my first consultant about three months into the company. Once we started developing the software, we were able to bring our first tool to the market six months later. That tool automated a lot of our consulting work. The problem was that nobody was buying it. I did not know how to get the word out about our tool, and I had lost a great marketing tool when I sold the website. I had a few dozen customers, and so we had one or two customers who bought the tool here and there.
I had to find a way to double down and sell the software licenses by the hundreds. I got introduced to Tim Moolic who is now our COO. He brought the sales force online. Early on in company development I was naïve. I was giving away equity easily, and I did not keep bigger goals in mind. I partnered too easily. That was the biggest mistake I made. I would bring on a new equity holder before I gave them a goal to achieve to earn that equity. I had to buy out a few partners early on. Tim was one of the people who was still with the company five years later. I gave him clear goals, and he built our sales force, our marketing force, and just helped the company take off.
Sramana: Did you and your consultants use the software tools that you had developed?
Brian Knight: We did. Those tools gave us a huge comparative advantage. We would go against huge powerhouse companies like Accenture and win. One time we bid 40,000 dollars for an engagement that a major consulting powerhouse had submitted a 500,000 dollar bid for. We won the deal, and our final bill was 20% less than that. We even beat our own estimates. That enabled us to go from customer to customer and underbid our competition. We were even able to leverage that for offshore engagements. A computer is much cheaper than a person.
Sramana: Was your business model at that time still primarily consulting fees?
Brian Knight: Yes. It was consulting, and for one problem set, we had a software tool. The software would do 90% of the work and the consultant would do the final 10% of the work. This was all going on during 2007 and 2008 when the economy was really low. Customers were laying off staff aggressively.