Sramana Mitra: What year did you start the corporate business?
Greg Besner: 2002 is when Sarbanes-Oxley was made effective. I actually don’t remember exactly when we launched with our first corporate client but it was probably in 2003.
Sramana Mitra: What was the sales model for the corporate business? At that time, were you selling on the phone? How were you getting those customers? How were they finding you? What was the method of selling?
Greg Besner: It was pretty traditional initially. We had two sales people and myself that were the primary business development sales people. Selling to those first customers is really important as a direct model so you really understand the requirements. The corporate business was for Forms 3, 4, and 5. We knew the workflow that was required.
Speaking to the customers was really important to understand how they were doing it historically and how they were hoping to do it. Then we signed some interesting distribution agreements. The first one was with NASDAQ. The majority of the public companies in the United States at that time were listed on NASDAQ.
We ended up having a distribution strategic alliance with them where they would include us in their portfolio of partners in a corporate services offering. We would share revenue with them. We were their exclusive partner. We tried a distribution partnership with some other firms as well, but that was probably the most public and what we hoped would be the most successful.
Sramana Mitra: When you sold the company, what scale were you at revenue-wise and what was the path of selling the company?
Greg Besner: At the beginning of 2007, we had competitors along the way but we had some great partnerships and some nice traction. You’ve written books about this. There’s so many metrics around total addressable market and everything else. I really wasn’t thinking about the total addressable market. I was obsessed with solving this problem. It turned out to be a relative niche. After 9/11, we started getting some traction.
In 2004, we really started to find our way with these two products. By 2006, we had grown to about 60%. We got to a $5 million run rate. Just looking at the audience of potential buyers, I realized that we didn’t have a broad suite of products. It was very specific. It made sense for us to be part of a broader solution.
Josh Kopelman was one of my investors. First Round Capital didn’t exist yet. He gave me really great advice once. He said, “Half the value you create in your company is as you’re building it. The other half is when you’re selling it.” Basically, making sure that you have the right buyer at the right time for your business. I sensed at the beginning of 2007 that our growth rate was probably at its peak. I also had some concerns about the financial markets. I’m not going to say I was identifying the problems that would happen, but it just felt like a good time.
I actually approached our investors and told them that 2007 would be the right time to sell the business. I initiated that process. There were potential buyers who had approached us over the years. When it was finally time to find a larger partner for our organization, there were already some interested parties. Then I made sure I had alignment with the investors and my team. We ended up engaging a banker. We sold at Halloween of that year.
Sramana Mitra: How much did you sell for? Are you at liberty to disclose?
Greg Besner: It was five times trailing revenues. It was never published so I’ll just leave it at that.
Sramana Mitra: I guess that the most important question out of that is did you make enough money out of that. The reason that becomes interesting is, for serial entrepreneurs, the first venture may be a small niche venture. If it’s a successful one, having capital for a second venture often turns out to be a very important tool with which to bootstrap a second venture that turns out to be of a different scale. That’s where my question is coming from. Did you make enough to be able to self-finance, at least, the beginning of the next venture?
Greg Besner: In addition to this SaaS company, my wife and I started a fashion accessories company in 2004. That business was profitable in its first 12 months. We got to about $14 million in revenue. We had a young family at that point. We had some liquidity from the profitability of that second venture that I co-founded with my wife.
In 2007 with the sale of Restricted Stock Systems, there was some additional liquidity. It was acquired by a public company. I stayed on until 2009. At that time, I became one of the investors in zappos.com. Zappos was sold in 2009. Between the business that my wife and I co-founded, Restricted Stock Systems, and the Zappos sale, within 24 months, I went from having no capital to having financial security.