SM: Tell me about the origins of BlackLine. What was it and how did you get it started?
TT: Officially I started it in 2001, but it really got going in 2002. I started it as a wealth management software company, and I used the money I made from SunGard to fund it. I don’t like to be told what to do. During my time at SunGard it was a publicly traded company, and there was always a big push to make numbers. It did not always result in the happiest of customers. I wanted to have a company that built really good stuff that had incredible relationships with our clients. It was very important to me that we had no unhappy clients. That focus probably made our success take a bit longer.
Another issue we faced was that we were trying to break into the wealth management market, which is dominated by Thomson Reuters. At the time, Merill Lynch also had a $1 billion wealth management software budget. They were not going to give that to a company with five people even if our software was fantastic. That is when I realized it was going to be a difficult market to be successful in.
One of our first clients was First National Bank of Nebraska. They were trying to do reconciliations in Excel, which was an error prone, tedious manual process. They used our wealth management application in a completely different area, which was financial close in accounting. That is when we found out there was nothing in the marketplace to do that reconciliation. It was not transaction matching. It is about knowing who owns each account, who does the preparation of the reconciliation, who does the approval, the review process, and how often all of those things happen. That is simple.
SM: That is not a problem specific to banks. That is everybody’s problem.
TT: As it turned out, it is a very large problem, so the market for what our software does suddenly became very large. We have since expanded our product offering substantially to include workflow enhancements, e-mail alerts, templates, automated interfacing and more. It is now a large set of functionality.
Initially our clients were companies that had some accounting scandals. HealthSouth was an early adopter. They had a huge accounting scandal and had to do two years of reconciliations. We built automation into the tool for them in 2005.
SM: How much money did you put into the company?
TT: A couple of million.
SM: How long did it take you to start generating revenue?
TT: We had little deals along the way, but it 2004 we almost went out of business. I was running out of cash, and my head of sales took the ideas we created for account reconciliation and outsourced it to India, created her own product, and sold it to Trintech for $5 million. That was devastating. I had thought she was a friend. She brought her son to my house for childcare to share my nanny. Greed won out with her.
As it turns out, that was a very positive thing. When you have a brand-new market, the vast majority of companies out there will not purchase a product unless there is a competitor out there to evaluate against. It actually had the impact of legitimizing the market, and that was the best thing that could have happened for us.