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Bootstrap First, Raise Money Later from Houston: Onit CEO Eric Elfman (Part 3)

Posted on Wednesday, Sep 23rd 2020

Eric Elfman: There was a pretty rich population of angels that if you had the patience and time, you could touch. 

Sramana Mitra: Were these Houston angels?

Eric Elfman: The majority were, but we eventually stretched out to Louisiana, a little bit in California, and even in the UK. It started with people in Houston. They had friends that wanted to get in on it, so it got wider.

In addition to that, we raised $10 million of strategic capital through UPS and Wolters Kluwer – a big American Dutch publisher who eventually bought the entire business. 

Sramana Mitra: How did you get to so many angels? It is an incredibly time-consuming matter and getting introduced to these angels is not straightforward either. What was your process to get to these people?

Eric Elfman: You know what defines an entrepreneur is tenacity and not getting frustrated by the news. We went knocking on so many doors that eventually someone answered. It was a few angels who answered.

The early investors in Onit were highly influential people including two owners of professional sports teams. One was an owner of a baseball team, John Moores, who was the founder of BMC software.

The other was Bob Mcnair who owns the NFL team Houston Texans. He owned Cogen technology which he sold to Enron. He was a local celebrity billionaire. I got their interest and they had a network that spun out pretty big and fast. 

Sramana Mitra: You raised $10 million in angel capital and got that project to what scale?

Eric Elfman: I was there for 10 years. I could talk to you about what made me leave four years before the full exit. We had sold a big chunk of the business before I left. I got it to just under $30 million of revenue and over the next four years, it grew to $60 million before it was sold. 

Sramana Mitra: What year was it sold and to whom?

Eric Elfman: It was sold in 2014 to Wolters Kluwer which was this big American Dutch publisher that was also one of the primary investors in the business. A lot of strategic money I raised came from them. The only reason that they funded the business was to buy it. 

Sramana Mitra: Are you at liberty to discuss the exit price of the $60 million company?

Eric Elfman: It was just over $300 million.

Sramana Mitra: Why did you leave four years before the exit?

Eric Elfman: It was a lot of my own doing. I made every first-time CEO mistake you could possibly make. The good news was that the idea and basic execution was so good that we weathered it and came out strong on the other side.

I had let myself turn into a day- to-day manager. I started thinking about career planning and performance evaluations more than I was out in the field with customers and partners pursuing things that would help build the business.

I let myself turn into a day-to-day CEO as opposed to the entrepreneur that I was. It took me to things that I didn’t like and wasn’t good at. I boxed myself in a way that didn’t feel good.

I let some politics get into the organization that I didn’t know to watch out for. It started to feel like a company that was not fun or pleasant to be at. We had sold half of the company to the strategic investor.

I had some liquidity and I decided that I wasn’t the person to take the company to the next level. You bring the story full circle. We are doing everything different at Onit. We’ve learned from our mistakes. We have organizational help, and we’ve grown the culture of the business strongly.

I remain in the field and go on sales calls as opposed to being a day-to-day manager. I got an executive leadership team that does the day-to-day management for me. I used the lessons I’ve learned here in my present company. We’ve grown much bigger in a shorter amount of time than the company I ran. 

This segment is part 3 in the series : Bootstrap First, Raise Money Later from Houston: Onit CEO Eric Elfman
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