Sramana Mitra: I need you to step through the process of building this company. Let’s start by zeroing in on the concept that you and Ken agreed on, and how you came up with that concept.
Carl Ryden: We started with a general framework of building a business where it has primary value through its use. Inventory is evil and Ken learned that in the vacuum cleaner business. It was going to be a software business. It was going to be SaaS.
We wanted not just a SaaS company, but we wanted something that, through the use of the tool, would generate valuable data that could be used later. We didn’t quite know how it will be used later. We just knew it will be valuable unique data. My thesis at that time and even now is that statistical significance is the economies of scale of the information age. If you have better data and you can make better judgments and predictions based on that data, you have a defensible advantage. It becomes a reinforcing loop.
Sramana Mitra: That gives us the framework of what kind of an idea you were looking for. What did that idea turn out to be? Did you consider multiple ideas that fit that general framework?
Carl Ryden: We did. Some of the ideas kicking around initially involved a FitBit-type concept but using hardware and software to generate the data. There’s this whole series of those like a digital scale that would track your weight. I told Ken, “Inventory is evil. I don’t want anything to do with hardware business because it requires far more capital.” Both of us were in a position where we were going to bootstrap it. We wanted to find a business that we could build ourselves and control our own destiny. Both of us had been successful in selling companies.
Sramana Mitra: You had some capital available too.
Carl Ryden: Yes. It felt like we earned our freedom. We eliminated hardware and consumer businesses for that reason, because they’re too capital-intensive. Inventory and marketing budgets were needed to support a consumer or hardware business, which made it prohibitive for us.
So we considered business to business. I said, “I know a B2B software that I had always wanted to build based on the web but we didn’t. It is for pricing commercial loans at banks.” That was the business that we had sold in 2006. I told Ken, “The banking world had changed quite a bit from 2006 to 2009. I think I could build that again but even better.” That’s when Ken and I decided to do that.
Mitchell who owned US Banking Alliance is a great friend. He’s retired teaching yoga. I called him to get his thoughts on it. I left him a voicemail. Later that night, I get a text from Mitchell saying, “I’m in.” I didn’t ask him to be in. I never thought he would be because he’s retired. I called Ken and said, “We got a third now. It’s Mitchell.” It ended up being me, Ken, Mitchell, and two guys from Ken’s vacuum cleaner company that he had sold. The five of us met at Charlotte and decided to launch what is now PrecisionLender.
Sramana Mitra: What did you launch with?
Carl Ryden: We launched the company in May of 2009. It was us five guys sitting in the room. We registered the domain name. I said, “I’m going to build the product.” Ken said, “I’ll do legal.” Mitchell was our Chairman. Greg was our CFO. Patrick was Ken’s President from his former company. Patrick was actually going to be the sales piece. We had nothing to sell yet.
Sramana Mitra: Did all five of you put in money into this company?
Carl Ryden: Ken, Patrick, and Greg were still working through the transition period of the vacuum cleaner company. Ken, Patrick, and Mitchell put in money. I think Greg may have put in a little. We all put in money. I don’t remember what it was initially. Over the entire course of the business, until a few years later when we went for outside financing, we put in a few hundred thousand dollars all together. None of us were getting a salary.
Sramana Mitra: How long did it take you to get a first version out?
Carl Ryden: We turned on our first client in January of 2010.
Sramana Mitra: Who was the first client? Was this somebody that you had as a client before?
Carl Ryden: It was. It was somebody who Mitchell had had a relationship with from his days as a consultant. It was a small bank in Louisiana. They actually signed a contract with us in November with the idea that we would turn them on in January.
Sramana Mitra: What kind of a deal size are we talking?
Carl Ryden: It was an annual license fee. It might have been $8,000 or $10,000 a year. It was not much.