Sramana Mitra: What was the go-to-market? Was it the same? You identified some influencers, sold to influencers, and then leveraged them to sell to the rest of the market, is that right?
Jory Lamb: It was a little bit different, but we started that way. We went into an area of influencers. We worked with consulting veterinarians. On the heels of that, we bought out a green screen legacy system and assumed their clients as well. In a span of about a year and a half of acquiring our own and then through negotiating and purchasing this legacy system and assuming all their clients, we went from 40 to 280. I spun out that revenue stream off into its own business.
In 2003, we had three revenue streams. We had a revenue stream of doing one-off software development. We had a revenue stream from this feedlot software and a revenue stream from training and miscellaneous consulting type of services. One of the biggest lessons I learned is that lack of focus was a detriment to our growth. It impeded us and it didn’t allow us to be great at any one thing faster. Since I learned that lesson, the business is markedly different. I took the feedlot software and spun it into its own legal entity. I hired someone in Nebraska. I had three full-time people in Nebraska to run this and we did all of the programming out of Canada. They ran the entire company for both the clients in Canada and US.
We were approached in 2006 to sell out. There was a company that specialized in cattle software. Part of how we grew was the reason why they wanted us. In the early 2000, we had something called mad cow disease. The amount of fear that created as well as the need for food safety, traceability, management of animal health, and the understanding of all of the epidemiology of animals drove some real interest and sales of our software product. Part of the catalyst for our growth and the eventual reason for our sale was the fact that we could trace all animals that any single animal had come in contact with inside of a feedlot. If you had an epidemic, you could use our software to trace back other exposed animals. That was a huge opportunity that this company thought they could leverage. They came in and bought out our company. They took the people from us. They took the programmers from Canada. It was good timing because we had just started on the path of building out software for the oil and gas industry.
Sramana Mitra: When this company approached you to buy this software, what was the revenue level that your spin-off company was generating?
Jory Lamb: We were doing about half a million just with the feedlot software.
Sramana Mitra: How much did they offer you?
Jory Lamb: That was a private deal. It was good. They offered us multiples of top-line revenues.
Sramana Mitra: We’re talking 2006?
Jory Lamb: That was in 2006 that they approached us. The deal was finalized in early 2007.
Sramana Mitra: In 2007, you had a couple of million dollars or thereabout in cash that you got out of this deal. You still have these other parts of your company running, right?
Jory Lamb: No. One of my key teachings when I get a chance to work with emerging entrepreneurs is focus, focus, focus. We actually faced bankruptcy in early 2000. It was a pretty surreal time where I felt like I could do anything and everything and realized that I wasn’t doing much. Coming out of that, we literally didn’t have enough money to pay the bills anymore. That was in 2001 when we had separate entities, put people in place, and I no longer tried to do so many things. That’s when I started down the path of SAP. One thing I chose to do was continue to do the projects that we were getting paid to do, such as web-based software. Everything else I got rid off or created a separate entity and put management in place. I was only doing one thing in 2003. Then in that periodm I saw a bigger opportunity which was writing software for the oil and gas industry.
Sramana Mitra: You were facing bankruptcy, what kind of ownership structure did that give you? In this half a million feedlot company that came out of the work that you had done, did you have significant ownership? Did part of the spinning out mean that the ownership was also diluted?
Jory Lamb: We’re dealing in pretty small numbers. I created a separate legal entity for the feedlot solution. I hired a full-time manager for running the business. I compensated him through salary and through commissions, but I never actually had to give up any equity. The equity was with me and the original programmer owned a small portion of that. Anyone else that came in after was remunerated through salary, commissions, and bonus. Today, that’s not the way I’d do it, but that’s the way I did it then.