7 Strategies To Get Your Company Off The Ground With Chris Taylor of Square Root

Most businesses stall just as they are getting started. For the founders, it can be demoralizing. You poured your blood, sweat, and tears into a business you now must shut down. For many founders, that certainly means a hit to the ego and the pocketbook. For others it means going back to a job they hate.

To help you avoid a similar fate, I sat down with Chris Taylor. Chris is the Founder and CEO of Square Root, a company FORTUNE magazine named the 15th Best Small Company to Work.

During our time together, we go back to the beginning and talk about how he got his business off the ground including everything from how he vet his idea to how he landed his first deal.

Enjoy!

Have comments, questions, ideas, or feedback? I want to hear it. Tweet me at william_griggs.

 

Topics Covered In This Episode

  • What’s the genesis story of Square Root?
    • Where’d the idea come from?
    • How did you vet the idea?
    • How did you know it was worth pursuing?
    • How didd you know it was time to jump from a FT job to start a startup?
      • What fears did you have at the time?
      • How did you minimize those fears?
    • How did you know your vision had legs?
    • How many people were a part of your founding team?
  • Who was the next hire and why?
    • What did they do?
    • How did you think about building out the team?
  • What did you build?
    • How did you figure out what to build?
      • How did you figure out what to build first?
    • How did you deal with customer feedback that was conflicting?
  • How were you funding this business?
  • Who are you selling to?
    • How do you sell it?
      • How did you land your first deal?
    • How did you figure out how to sell it?
    • How did this change over time?
  • What is one thing you’ve learn at the following companies / organizations that you’ve applied to help launch and grow Square Root?
    • Trilogy
    • 500 Startups
    • TrueCar
    • PriceLock
    • TechStars
  • What was the hardest moment you encountered when trying to get Square Root off of the ground?
    • How did you tackle it?
  • What 2-3 factors do you credit for the success you all have had to date?
  • What are you most proud of about what you all have been able to accomplish at Square Root?
    • Why?

 

Interview Transcript:

Startup Slingshot Radio’s audio transcription is done by GMR Transcription

William Griggs: Most businesses stall out just as they’re getting started, for the founders it can be demoralizing, you poured your blood, sweat and your tears into a business you now must shut down. For many founders, that really means a hit to the ego as well as the pocketbook. For others, it means going back to a job they hate. To help you avoid a similar fate, I sat down with Chris Taylor.Chris is the founder and CEO of Square Root, a company Fortune magazine named the 15th best small company to work for. During our time together, we go back to the beginning, before all of the awards and talk about how he got his business off of the ground, including how he vetted his idea, as well as how he got his first deal. Enjoy.

All right Chris, thanks for joining us today.

Chris Taylor: Thanks for having me. I’ve always been told I’ve got a face and a voice for radio, so very excited to try that out on your podcast.

William Griggs: That’s a good one. I’ve yet to hear that one from a guest, but yes I can tell you definitely have a face for podcast and we really appreciate your time. In this interview, I kind of want to go back to the beginning and drill into how you got Square Root off the ground. I want to cover where the idea came from, how you built up your team, how you determine what products to build, how you generated early sales, but before we dig into that, can you tell us a little bit about your background and what Square Root is?

Chris Taylor: Sure, absolutely. So, I’m the founder and sole-founder and CEO of Square Root. I was technical way, way back so I graduated back in the mid 90s from Carnegie Mellon and moved down to Austin to work for a company called Trilogy, which had a great ten year run there. Started off technical and moved to where I was managing their west coast auto practice, then I spun up and started Square Root.

So, we had a long history that we’ll go through today, but what Square Root – where we found our real niche in the place we’re focused on now, it’s all been helping some of the world’s largest retailers manage their stores. So, it’s a really interesting problem in retail that you when you have a 1,000 stores spread around the U.S. or around the world, how do you actually manage those and get brand consistency and customer consistency and sales through the stores, and it’s a really interesting problem that focuses on these district managers that run around all the stores and try to live out of their cars and try to really drive corporate initiatives through those and we have a software platform that helps those district managers be better at their jobs. It helps them collaborate up to corporate and down to stores. So, that’s what we do today.

William Griggs: Got it. Got the overview, kind of got a little bit of your background of where you working and where you went to college. Can you tell us a little bit more about the genesis story of Square Root and how you decided to –?

Chris Taylor: Yeah, we are the – Square Root is the typical overnight success story that took ten years. So, I actually started Square Root in 2005, late 2005, early 2006 and it was the perfect time for me starting a company. I’d been working for ten years, I had a little bit of experience managing a T and L, I wasn’t married, didn’t have kids yet and I was ready for a career change. So, that part was all very obvious, the problem was I didn’t actually have the idea at the time, so one of our values now at Square Root is be customer inspired and that’s really what I did.

I decided I would go to my network of customers that I’d worked with in the past, I would go to my network of talent that I knew from my Trilogy days, I would put it together and we would just go and start working in the industry, the auto industry, which is where a lot of my background was, and we’d figure it out.

I went to someone at Nissan and said, “Hey, you know Elizabeth, Elizabeth’s great, right?” They’re like, “Yeah!” I was like, “If I could get Elizabeth to come in and do something, would you hire us?” And they’re like, “Oh, absolutely!” and I went to Elizabeth and said, “Hey! Nissan’s going to hire us, do you want to come and work with me and we’ll go get a project.” And that’s how we got it off the ground.

William Griggs: Did it start mostly as consulting? Is that how you kind of tried to get it off the ground?

Chris Taylor: It did. Yeah, we started off doing a lot of kind of analytics as a service, selling the service, where we went in and kind of took problems, kind of did out source business process, you know engineering to us and did some things. So, our first project was, we were doing all the orders for Nissan to optimize profitability across their geographic regions and things like that, and we actually tried and so then – it was always the focus was, let’s take these things and kind of move them in to the product that we can go and do enterprise software.

And so we tried taking some of those early ideas and productizing them and a couple of those early ones didn’t work. We had one the electrical vehicle space, got pretty good traction, but never really turned the corner, then our order management you know, processing it’s – it’s turn off good revenue, million dollars or more, but it never really got to scale, it really never had the potential to get to scale that we would have liked. So, we kind of hit on our big one, which is what we’re on now.

William Griggs: And so was the goal initially to say hey, I want to start a business like you said, 2005, 2006, you had a bunch of work experience, you thought you could parlay, it’s an entrepreneurial adventure, you didn’t have the risk of being married and having kids and the opportunity it costs that come along with that. Was the thought, hey lets start consulting, obviously you generate a lot of cash flow early on in the venture, as opposed to building some software that might take a year or two. Is that kind of how you were thinking about it or is that – just kind of more a natural fit?

Chris Taylor: That was how I was thinking about it. And I thought, literally, as predictions and hindsight, yeah I thought, six months from now we’ll have the product idea and we’ll be off to the races. You know, doing great in our price software company and of course that took…five years? Before we really hit on the big idea and so yeah, that was a little optimistic that it was going to be four months.

But you know, in the mean time we kind of grown the consulting business to be a multi-million dollar business, you know it was thinning off cash flows and we were in a good position to go after the product idea and kind of really pursue it at that point and do it under our own steam, but that wasn’t how I had imagined it up front.

William Griggs: So you’re doing the consulting, you’re generating the cash flows, you’re kind of using that and leveraging that time and those relationships to identify other potential business opportunities in terms of software, you said some of them didn’t work. Can you talk us a little bit through some of those that didn’t work and why they didn’t work?

Chris Taylor: Yeah, so the original one was kind of an order management platform. We could go and basically work with manufacturers, especially in the automotive industry, and basically do the orders for their cars, and there was a process consistency problem, manufacturer/manufacturer, where the way that each of them did it with their dealers was very different. So, it was very hard to come up with a generic value prob that kind of supported everyone. So, it was kind of a bad market in general for that.

The second one, we actually got pretty good traction with. We had a spin out we called EVICS – the electric vehicle information exchange and basically the problem we were trying to solve was when – go back to 2009 when a lot of electric vehicles, like the Nissan Leaf were launching, there was a lot of – there’s going to be a million of these cars on by 2015, these cars are going to be taking over a large percentage of vehicles on the road and all the utilities and governments were freaking out because there’s a lot of considerations of your utility, and you suddenly have all these cars plugging in.

What’s that going to do to demand curves? And if you’re in the west coast and you don’t live on the beach and no one has air conditioners, and electric cars is the equivalent of adding a couple of houses to the grid. So, we actually worked with six manufacturers to pull all their demand data and all their sales data and then distribute that out to utilities in ways they could do infrastructure planning. So, pretty interesting space, we actually were working with about 80 utilities but two things happened. One is it was interesting, we got contraction but you know, utilities were willing to spend $15,000 a year on that not hundreds of thousands dollars year for that information.

And also although they’re getting good traction now, the infrastructure issues just – once everybody kind of did their planning and understand the implication, then the cars didn’t take off quite as quickly as everybody thought, it was just a little bit – wasn’t quite the huge problem that everybody thought. We still could have made that into a great business. The issue was, right as we were doing that was the same time that we kind of hit on the retail performance product CoEFFICIENT that we’re doing now and that product has huge upsides. So, for me, it became a focus issue, something that we’ll probably talk about later, but really getting company [inaudible] focus is hard as a CEO and to have these kind of dueling priorities, one of which probably had a potential for a million dollars in revenue total – the EVICS product and the other one has an unlimited revenue potential.

I made the decision to shut EVICS down this year, which is hard because it was a personal baby of mine. I love that industry, I drive an electric vehicle, but it was the right thing to get focus on the company.

William Griggs: So, it’s interesting. So, as we’re thinking about – correct me if I’m wrong, is this how I kind of understood what you were talking about. The older management system, it seemed like you had people that were interested in that, but it seemed like you weren’t necessarily seeing consistency among the demands of the individuals. Sounded like some people wanted various specific things, some people wanted totally different things, is that why that one didn’t work?

Chris Taylor: Exactly. Yeah, it just – just the process was so different manufacturer/manufacturer, it was hard to have a generic product that –

William Griggs: And then the electric one was obviously market demands around the cars, and not picking up till more recently, but then also who you’re actually selling this to and their appetite for how much they’re willing or interested in spending, led you to kind of leave that one out.

Chris Taylor: Yeah. Again, here’s the thing about that one. Really goes back to the focus, which is – we probably could have even sold that business for not a ton of money, but a little bit of money, but even the process of selling would have just sucked up so much of my time and so much of some of the management team’s time. It just wasn’t worth it. We had a great opportunity to go build something truly fantastic that was CoEFFICIENT, so it was just especially hard, where you just don’t have enough resources to go around. You know, we’re not VC backed, we’re completely bootstrap, so to spend your time, and your energy, and your dollars trying to do more than one thing, shouldn’t be so hard. So, it’s not a bad idea. I mean I’m sure – the relationship with the utilities was just pretty amazing, we could have done something with that, but it just didn’t [inaudible] where I wanted, that’s my time and my team’s time.

William Griggs: So, as people are in the audience, maybe they’re entrepreneurs, maybe they’re looking to take the leap from their corporate job and they’re thinking through…this seems like and I know some people online call it a stair step method. A method of basically trying to buy your time away from your job and this way you did it via consulting, generate some cash that you can then invest and as you’re doing that consulting, figure out what are the ideas? What are the themes? What are the consistent needs that you’re seeing through your clients? Then how can you start to package that up. Are there any downsides to kind of going that approach, that you can think of?

Chris Taylor: Yeah, there’s a ton. One is just it takes a long time. Right? I mean if you come out of the gate with an idea and somebody drops a million bucks on you in funding, you know you can focus on that idea of something starting and get the thing. I mean consulting; it’s a bit of a trap. Right?

The early days, it was really just me, everyone else was 1099 or outsourced to companies that had developed capability project – management capabilities and it’s hard to work on an idea when somebody hands you a check for a $100,000 to go work on something that they need versus saying no to that and spending your time thinking about the big product idea and how you do it. It just takes more time, because you don’t have any capacity.

And it wasn’t really until I’d grown a full time team. You have a little bit of bench and a little bit of time, that you can start to invest that back in to your own ideas and generic ideas and it just takes a lot of time to do that. Now, it’s great as far as ownership. You know, it’s fantastic obviously because you never had any pollution and also we can kind of do things out our own pace and our own speed without any kind of unrealistic or anyone pushing us to do something that we don’t think is the direction we want to go from an investor’s stand point, but it does take time. So, I think I would summarize that as highly recommend the outcome, not necessarily the journey.

William Griggs: So, it seems like as you’re working through that process, as you’re building a team, it sounds like – started with new, like you said you went to Nissan, you gave them that offer and you went and got the lady to join the team, everyone sounds like at that point kind of 1099 and the contractor until you can start to build on more of a stable client base with more consistent cash flow revenue coming in and then kind of how do you build the team? Because you talked a little bit about being able to build up that full time team, being able to then siphon some of the resources off to focus on not necessarily consulting work, but your other projects. How did you just kind of build up that team over time?

Chris Taylor: Yeah, you know it’s hard and coming from a bootstrap perspective, especially – and basically my money kind of was left over at the end of the day as my salary. So, hiring full time people, especially expensive full time people, was a hard thing to do for those original folks. Now, the benefits of – I would go back and do it much earlier. Really didn’t start building the full time team until probably about two and half years, three years into starting Square Root. And it’s lonely, as a founder it’s really lonely if you don’t have a team around you to help move things forward.

And our fast growth really started after I started building that full time team. Elizabeth is now our C.O.O. and Mike is our product – original product guy to come in to start the product organization. So, and then from there, once you kind of make that decision and you start to build the team, it all happens pretty naturally. You’re sort of growing, you need more people and talent, they have a huge focus for us, and now we’re 39 right now, just about to crack 40 here in Austin.

William Griggs: So, you talked a little bit about you wish you had built it sooner. What was stopping you from kind of building the full time team out sooner?

Chris Taylor: Yeah, it really kind of goes back to the just spending money. One of the big challenges as a young CEO, especially coming from fairly rural roots in West Virginia, is laying out six figure salaries to folks and making those commitments to people, is scary. It’s just kind of hard to do. So I built kind of a virtual company before that where everything, you kind of scale up and scale down immediately and there wasn’t a lot of risk in it, as things moved forward.

Just kind of overcoming that fear and having a line of sight to some revenue that helps you do that – allowed me to kind of make that leap. And you also have to start dealing with health care and benefits and all these things that weren’t as important when you’re a one-man show, so it’s just a scary leap to take, but absolutely worth it and something that I would recommend much earlier.

William Griggs: Yeah, it seems like a force think function to a certain degree. I don’t know if you agree. Seems like when you take that leap, you’re signing up to help lead these individuals that have families, that have dreams of their own, but then as you do that, they’re buying in to the vision, they’re going to work extra hard to make it happen as well.

Chris Taylor: True. And it makes you all in as well, right? You have to live up to the expectations that you set, the vision you set, you know, it certainly keeps me getting out of bed every morning, working as hard as I can to make Square Root a fantastic company. We have the potential to make it so.

William Griggs: We talked about the origin story of getting it off the ground, consulting, building the part time virtual team, transitioning a little bit to the full time team. We talked about the order of management system, the electric car product, both of those and why they didn’t fit. Why don’t we talk a little bit about the CoEFFICIENT product that you mentioned a little bit earlier? Where the idea came from, how you figured out that this was the one to stick with.

Chris Taylor: Yes, we had one our customers kind of come with a unique problem around this. How do we enable our field people to have more consultant conversations with our dealerships, still in automotive? And the idea, one way we knew the idea – because we had this very small project, you have kind of sub hundred K, and you know within nine months it turned into a multi-billion dollar project. So, something’s definitely going on there where wow there’s real need here, we got an amazing amount of traction and we could just see it. It was just obvious. It’s kind of like when you meet the woman you’re going to marry, in my case it was obvious to me that that was the case.

As much as those other businesses along the way were us trying to go and make and fit the market, this one was just obvious. A couple conversations around the industry and other industries, it was a problem that was a big one, that everyone had that wasn’t anyone doing anything around it, and we had some contraction working on it, so it was kind of you know it you when you see it, you get the product market.

William Griggs: Very cool. So, where did that project come from? Was it a client you already had?

Chris Taylor: Yeah, it was a client we already had, and so – what started off as a small extension and some other stuff we were doing, has now become the complete focus of the company. Hard to identify that, hard to say this is the one we’re going to bet on, we’re not going to do things like the [inaudible] business, we’re going to start end of lifing some of these other more consulting type projects, we’re going to run a lower product – a lower margins to reinvest in people that are just going to work on making the product better and tending of customer commitments that we have. That was a very difficult transition that we went through in 2012.

William Griggs: I think in hindsight, it’s possible that you can be thinking or helping entrepreneurs listening to this podcast think, well they can always go back, they can always go back to the consulting versus – just because they make the leap towards the product doesn’t mean those revenues are gone forever. If you have to go back, seems like you can go back. But the question I have just based on kind of what you’re talking about, kind of having the project go from being a small project to a multi million dollar project to having it be from a client you already knew, what about kind of the IP and what is like – how is the agreement structure that allowed you to kind of take the negative of what you’re doing for them and use it for others?

Chris Taylor: Yes, so that’s a great question. So, we were always very careful about IP and I try to share my idea language or what I have with a lot of other start-ups around us, because of that. There’s a lot to this answer. There’s two things you need to be concerned about. One is the actual legal contractually, what did you do to IP, and that’s actually surprisingly easy to do and the way we do it is, if we’re actually building something, you know for someone, if there generic components that don’t have any of the customer’s confidential information in it, then we have rights to use that in other places, they have rights to it as well.

So, that’s how some of our early contracts allowed us to go do that. And a lot of times you have competitor carve out of that, hey you can’t do that with these other three competitors that we have, but as part of a renegotiation of our some of our big contracts, we went in and got very clean, yeah I have rights to that.

And to do that we had to have the discussion with the big business owners and kind of tell them what we’re doing and why and why it would benefit them in the long term of us working with other folks in the industry and other industries that benefits that they would get back to that. That’s the harder conversation, and also the one that’s harder to live by. It’s a contract, pretty cut and dry and the hold up and if you ever get into court, it’s too late anyway. It’s the expectations you set with your customer around what you’re doing, why you’re doing it.

The way we manage it is, we took this chunk and put it in our product and went and did this. Is it going to piss off our customers or are we going to end up hurting a relationship? That’s the line that is easy to kind of discuss, think about and do the right thing by your current customer. So, that’s the harder one. Having those hard discussions, drawing that line, and making sure that you are doing right by your current customers.

William Griggs: So, it sounds like with the legal agreement that you and your lawyers have drawn up, it sounds like you’re setting yourself up for success during or prior to the engagement or while you’re agreeing to the terms. And then it sounds like, once you realize you hit on something, then it’s having those hard conversations with the partners.

Chris Taylor: Yep. Exactly. And you hit on it right, it is something you set up at the beginning of a relationship and it’s literally when we go in to any new customer contract. Now we have the SaaS portion of it, which is very easy to write. We all have the same product now, you guys don’t have any rights to that. So there’s all this stuff. But there’s always the we have to go do integration and we have to do these other things to kind of hook up the enterprise of the product and so there’s a little consulting…part of it.

The biggest thing we care about in that professional services agreement are those IT rights and that if we do something for you, it kind of goes back into or pull stuff that we can put into the product or use somewhere else. That’s the stake in the ground.

William Griggs: As you’re having those kind of hard conversations, seems like most clients would not want this to get into the hands of the competitors, I guess depending on the product. Can you talk us a little bit more through some of those kind of hard conversations and what they were like and how you positioned it?

Chris Taylor: Yeah, it’s – I like to tell the story, because it’s so obvious. There’s two worlds. One is – let’s say five other automotive manufacturers were also using CoEFFICIENT, would you as a manufacturer get a lot out of that? And they’re like, yeah of course. But that’s not the case, right? Right now it’s just me and you kind of helped me build this.

There’s kind of two scenarios. One is we’re successful and we go out and we actually do good, three of the four manufacturers turned it in to a product and they’re going to provide a lot of feedback and they’re going to drive a lot of product development things, that you’re not thinking about, things that are going to come back to you.

Or, we’re not successful and we fail and you’re right back where you started which is, you’re the only person that’s using it so, its kind of a win win situation for you. We’re going to go and invest a bunch in the products, whether we get a new customer or not, that you’re going to get back. And if we do get more customers, we are going to invest even more and they’re going to drive some things back, and so that conversation – literally had over lunch with three executives, was the one that kind of that –all the noncompete language ripped out of the contract.

William Griggs: Makes a lot of sense. So, we talked about the consulting phase, talked about kind of exploring three different products, sounds like you had the tough conversation with this one. How do you perceive from there, do you just look for more companies like the company that you were consulting with to kind of pitch the idea and get their head wrapped around it?

Chris Taylor: Yeah, absolutely. We’re very good at same store sales, like customers we already have and growing our relationships there, getting the products broader and deeper into the organization, going international. Things like that. And then the harder focus is, you order large enterprise software sales, our deal times are measured in years, frankly, not months, to try to close a deal. So, a lot of focus of the company now is how do we make the product much more modular so we can get in with a smaller value proposition and faster and the traditional land and expand. So, that’s our big focus.

We’re really focused now on transportation adjacent, so not only just automotive manufacturers, but all the kinds of parts, accessories, motorcycles, large trucks, all those type of things and then we got a couple conversations going with some very large retailers that are outside of transportation completely, that are household names that I won’t mention. So, we’re kind of exploring both things that are very adjacent to what we do as well as large, new markets.

William Griggs: Makes a lot of sense. It seems like as the company’s growing, your able to try these other tactics like you’re saying, go in to adjacent markets, trying a different approach, kind of the land and expand, kind of get your toe in the door, prop open the door so you can sell them more stuff, get them bigger contracts. But going back to the beginning, you had that initial consulting client, got them over lunch to say yes, we’ll pull up a non-compete, let’s do this thing. What’s that next discussion? Like, who’s that next person? Is it someone you already had contact with? Is it their biggest competitors? Is it not their biggest competitor? How did you think about that?

Chris Taylor: Well, I’ve been in the auto industry for 20 years now, but at that time 15 years, so it was almost like I could always get the meeting to start the discussion with other auto manufacturers, I knew them all. The problem was we never had the big, great idea to go and have that discussion round so, really it was just at that point, tightening the story up around what it is your providing and picking up the phone and hitting the road. And starting those 18 month sales cycles and getting things moving and start working on the organization.

So, that was really the process. Just go back to the network and sharpen the story and tell it.

William Griggs: So, you’re sharpening the story you’re telling them, you got your pitch stack, got your positioning down, probably getting a lot of feedback and iterating on that. What’s kind of next, as in terms of the next step? You starting to sell some deals? How are you thinking about maybe building the product out and growing the team from there?

Chris Taylor: Now, pretty much because we’re bootstrapped, it’s dealing with revenue, right? So, when land that next million or two million dollar customer, we’ve got a model of how that rolls out. How much of that goes in sales marketing, how much of that goes into product development, how much goes into more of the consulting – our customer success organization to make that customer successful, and it’s scale as quickly as we can as revenue will allow.

And we’ll do that through the next stage growth and then kind of see what are options are there about maybe looking at universe capitals and stuff like that. But for now we’re kind of on track to figure out the model under our own steam. Just when a dollar comes in, cut it up and give it out to the organization and scale.

William Griggs: That’s interesting. I’ve never really heard anyone quite describe it like that. Can you maybe tell us a little bit more about it, without getting into too many details, around that model and how you’re thinking about it, how maybe you tweaked it over time?

Chris Taylor: Sure. Tweaking it over time is probably the better way to put it because I don’t think we got it 100 percent figured out yet, when we really hit scale. But at least we have our first cut about what do we think it takes to really stand up and support one of these large customers, especially if it’s going to be in a new industry and so that portion goes over to our data science and our customer success team to stand up, integrate, and implement someone.

And then for the rest of it, it’s all around priorities. Right now we have a lot of priorities around sales marketing, getting [inaudible], that was all the sales marketing and now we’re starting to build out our teams, we have a lot of investment going into that area and then kind of everything left over goes to engineering the product, to starting to work on the next big idea. Start to think forward on what are the other ideas we can have that are adjacent to what we’re doing now, or to make the product better faster, better for our current customers and easier to sell to customers. Every deal we get, we look at what reality was around that and then we tweak the model and kind of model it forward.

William Griggs: We’ve had lots of VC backed entrepreneurs on and they talk about totally different problems. You might be thinking how do I get 10 more customers, how do I scale my team ahead of that because you have the VC funding in the bank versus the thinking about the revenue focus. So, that’s why I wanted to dig in a little more around that and think through, maybe to help some entrepreneurs in the audience that are thinking about taking a similar path or are already on this path think about it.

So, as far as breaking down the revenue, do you have a certain percentage that goes to something like retained earnings, to kind of give you a buffer or what else besides kind of your four functions that you talked about – customer support, data science, sales marketing, and engineering a product. Is there other aspects of the pie if you will?

Chris Taylor: Yeah, I mean, we always keep a cash flow reserve, rainy day funds, try to keep at least six months cash flow available for debt or kind of retained earnings that are laying around. So, for sure you need to keep that just so frankly I can sleep at night, as the CEO. But that’s kind of there now and really every new dollar that comes in goes back into the operations.

It’s very different when you think about the hard transition for me, it’s very hard to move consulting, the loss of sales stories on it, where most of the ways through that transition, I don’t think we can declare victory yet. I think we need to get a little more traction with a few more customers before we get to really say that we’ve successfully done that transition. It’s very hard because you get used to – instead of just cash flowing the company and running at your consulting margins of 20 to 30 percent, now you have to say no, we’re not going to run this [inaudible], we’re actually going to run a much lower margin, so I can’t take any money out of the company, you have to roll it all back in to bet on the direction you’re going, to create value in the company, instead of just creating profits in the company.

It’s a very hard thing to do, it’s like sit down have a conversation with my wife, type of thing to do, right? It’s going to be a little different over the next couple of years, because the goal is to grow revenue and the team, not to grow profits. It was very different from how most companies prior to 2012, where even our comp plan, we used to have a profit share, and so it was a large percentage of the comp for early employees was the profit share, because we were growing profit every year and revenue every year, and I had to completely redo the comp plan because our goal wasn’t to make profit anymore, so suddenly everyone’s salaries was going to plummet because we weren’t going to be focused on profit anymore.

Yeah, we had to completely restructure the company and our conversation and all that around this new kind of concept, so it was hard. We survived that transition and now we are just working on showing the world that we made it work.

William Griggs: Very cool, very cool. Thanks for the overview. Definitely gives another perspectant, the non-picture backed perspective, we definitely need in the podcast, so I’m going to dig into a couple more items before we finish this up. And I want to dig kind of into the product side of things, we kind of glossed over that earlier around, you had the nugget of the idea, you were working on as a project for a client, they’re paying you, deal got bigger, SaaS transitioned that into kind of a bigger product that you offered to more people – out of that engagement did you actually build a piece of software for that client that then you were able to replicate and use for other individuals? Or was it more just that was just the genesis or the initial thought behind a potential product?

Chris Taylor: A little bit of both. Certainly our main product is very similar to the initial product that we built, but there were a lot of things we had to completely re-write, to make it better, faster, more flexible, more focused, all those kinds of things. So, it was a bit of a half and half. We took a lot of our concepts, simple things – we’re going to go and do a customer in Canada that needed to be in French, well that wasn’t in the initial scope of what we built for our original customer, so alright, there’s a lot of restructuring we have to do on the platform to make that work.

So, we got ahead of a lot of that. When we decided to move the product direction, we literally hired ten people that were non-billable to go and work on all this stuff, so we would rebuild everything. And our current customers got a lot out of that, right? Everything was faster now and better and a lot of things they didn’t see, maybe the interface, what was happening behind the scenes, they got a lot of value out of that, whether they realized it or not.

And it set us up to actually be able to sell in other geographies, rebrand it for other customers and do things that would help us, scale at the same time. So, it’s all still one copace, but highly customized for some of the early customers.

William Griggs: And then as you talked about hiring those ten people, were those mostly engineers? Were they product managers? How did you think about that?

Chris Taylor: Engineers and product managers, so this was prior to us investing in the sales marketing, so yeah it was really building out the U.S. engineering team and the U.S. product team. We do a lot of off shoring as well, we have 35 folks off shore. We have historical development and we – that’s a lot of U.S. teams to build off the product.

William Griggs: Very cool. This has been a really cool background in to Square Roots. Do you have time for maybe a couple more questions?

Chris Taylor: Sure.

William Griggs: All right, perfect. We like to do rapid fire, sometimes in these interviews, try to get to the crux of the matter, get to the most important parts that people can kind of take away from the conversation, so one rapid fire question might be: What is one thing that you’ve learned from some of the companies and organizations that you’ve been a part of to help lodge and grow Square Roots? For example, Trilogy, is there one piece of goodness that you’ve kind of taken and applied back into Square Root?

Chris Taylor: Yeah, enterprise sales is really hard.

William Griggs: And so did Trilogy figure that out and figure out how to do it?

Chris Taylor: Ah, they did. They were very good at it and I kind of grew my sales jobs – going from a technical guy to a sales guy is an interesting transition to say the least, but that’s – they were very good at it, very good at large relationships, DOC level relationships, the time I learned there – all the things I learned there, were directly applicable to the type of customers we go after today and the type of company that I built.

William Griggs: Great. Very cool. According to your AngelList profile, you’re an investor in 500 start-ups, what kind of experience is rubbing off for you as you work with them?

Chris Taylor: Well, that’s one kind of fun to arm chair watch, right? Because the 500 start-ups investment philosophy is – it’s literally hundreds of small investments. So, I think if there’s one take away there, it’s that start-ups often do fail. So, there’s much more of a black swan approach, where you never know which one is going to be the big one, but if you play in everything, you’ll get it. So, it’s just interesting to read through and see all the things that are happening out in start-up land, both here and international. It’s always good; kind of fodder to just think about things you could be doing differently in your own company.

William Griggs: Yeah, definitely a different perspective and different route than your taking. What about TrueCar?

Chris Taylor: Yes, TrueCar we – they were one of early customers. We actually kind of built the first version of the product, their first analytic model on that, actually on the patens. I think that one, if there’s one interesting thing, is that brand building is very expensive but incredibly valuable. They recently went public and are north of a billion dollars in value now. It’s been fantastic to watch their kind of rise from start-up concept from 2007, 2008 to having commercials all over TV and the things that you’re doing now to build a brand. It’s been a lot of fun to watch.

William Griggs: By the time this interview goes live, we will have had the interview with Bernie Brenner –

Chris Taylor: Great.

William Griggs: – as part of TrueCar as well, so they can check that out. What about Pricelock?

Chris Taylor: Pricelock was really an interesting concept around fuel hedging, so basically bringing the ability from the consumer to say, “Hey, I’ll pay ten cents over pump price now, and I’ll buy 400 gallons, so if prices go up, I still pay ten cents over pump price now.” I think the most interesting thing about that one is it’s relevant for today’s prices, is that people obsess over the price of fuel and the price of oil, but they have an incredibly short-term memory about it.

In the auto industry now, everyone’s buying these huge trucks, because gas is cheap, right? I mean, you’re going to own the car for two to five years and gas prices are going to have huge fluctuations. Every body today is buying trucks and when there’s a crisis in the Middle East, gas goes to $4 and the electric vehicles and the Priuses will do very, very well. It’s just fascinating to watch how short that memory is, literally measured in months about how people make decisions based on car prices and travel and all those things based on fuel.

William Griggs: Yes, it’s very interesting. Definitely, during the time that we’re recording this interview, oil is down – I don’t know – $50 a barrel or something low, and people are questioning [inaudible] liability in the long-term, not thinking the standard of supply and demand and how there is a limit to how much oil is on this Earth, and that we can access it at a reasonable cost and that that’s not going to change just because the oil prices are down currently.

Chris Taylor: Exactly, and mark my words, six months from now every body will be having a completely different conversation and completely forget that conversation, right? It’s just amazing how short-term the memory is.

William Griggs: And all be looking to get rid of their F-250s.

Chris Taylor: Correct.

William Griggs: Very cool. And then I know you’re a mentor at Techstars. What kind of experience have you been able to gather from that so far?

Chris Taylor: That one I think is just how rewarding mentoring really can be. It’s really an amazing experience, Techstar does a fantastic job of culling down 1,500 applicants into the ten that come into the program here in Austin and it’s just a great group of entrepreneurs and I certainly get more back from that then I do – then I get sometimes, that’s the way I feel always. So, it’s just great. Every body, no matter where you are in your career, there’s someone you can mentor, you should actively seek out. Have that – take somebody that’s a step below you and bring them up to your step.

William Griggs: Yes, I think that’s very interesting that you touch on that point. I always think of it as a ladder, right? I’m looking at the ladder, I see people that are kind of ahead of me, and maybe they can help me out and that keeps me motivated, versus looking back and seeing some people that are further down the ladder and how far you’ve come up the ladder and the things that you’ve been able to accomplish. Because I know lots of people in the audience, as well as I, kind of feel like, you know, I’ve never done enough, let’s do more, let’s do more, right? But being able to look back like you’re saying, maybe one or two rungs down the ladder, try to help those people get to where you are and then they reach up the ladder for some help to get up the ladder yourself.

Chris Taylor: Yeah, in the end you always learn something. I do a lot of mentoring, entrepreneur organization, and some other stuff around town as well. I mean, you always walk away with some tidbit, like wow, okay, that person – that company’s two rungs on the ladder lower than me, but they do these two things way better than I do, and that was a great idea, and I’m going to go home with that today and my company. So, it’s always goes both ways.

William Griggs: Yeah, for sure. We talked a little bit about some of the scary moments, how you were able to transition from kind of a virtual team to that full time team, that commitment that you had to invest in some of the company at that point. What was kind of the hardest moment that you’ve encountered thus far, getting Square Root off the ground and how did you go about tackling it?

Chris Taylor: You know, if I had to pick one thing on that, it really is a spending money thing. It’s just – in the early days I booked everybody’s travel, my travel, I was on Priceline trying to get the best, possible prices for everything and it’s just – in the fast world today, [inaudible] and structures, it’s something that would have made 2005 me cringe. It was a really hard thing for me to overcome, because it really was my money.

When Square Root took you to dinner, I took you to dinner, because that was 50 bucks that wasn’t going to be my paycheck, so that was a really hard thing for me to overcome. And it really just was, not to use the ladder analogy again, it just slowly getting to the point where you get comfortable, making the $5,000 decisions, then the $10,000 decisions, then hiring that first person for 100 and whatever thousand dollars, then hiring the second one, and now I’m literally writing $100,000 checks, every week. You just kind of get used to that. Yeah, but it was hard. It was hard, back to the bootstrap journey, when it’s your money and it makes – the good news is, I think we’re very cash flow efficient, we’re very aware; we’ve had some very smart growth I think, but it was certainly terrifying along the way.

William Griggs: So, you’ve had a lot of success, seeing that you’ve been ranked in ink, and Fortune as a small business to work for one, of the top ones. So far, what two to three factors do you kind of credit to the success that you’ve all had to date?

Chris Taylor: Yeah, I mean, if I had to choose two…the team is the number one thing. It’s just the difference between a great team and an okay team is the difference between a successful company and a nonsucessful company and it’s by far my proudest accomplishment, is the folks that work at Square Root.

And the other one, I think goes back to focus. And it’s something I still need to work on as a CEO and I think that’s something that’s hard for young CEOs – first time CEOs to do and it is that everything’s a shiny object and a great opportunity and how do you get everyone on the team focused down to most efficiently going towards the thing that has the highest probability. And we’ve done a lot better of that, just with goal setting and trickle that down to the organization, and we’re good at that now and that’s something that wouldn’t have been true three years ago. So, team focus. If you’ve got those two things, you’ll figure it out.

William Griggs: Those are definitely things to try at home for the listeners. So if people want to learn more about Square Root or connect with you online, how can they do that?

Chris Taylor: My email is ctaylor@square-root.com and you can also find me on LinkedIn and our Twitter handle is @sqaurerootatx.

William Griggs: Perfect. I’ll put those links in the show notes. Chris, this has been an awesome interview, definitely a great perspective, learned a lot and really appreciate your time. Thanks for coming on the show today.

Chris Taylor: Well thanks for having me.

Chris Taylor’s Bio

Chris-TaylorChris is Square Root’s big vision maestro. He pushes the team to dig deep to understand their customers and innovate to make them better. He’s spent his career developing strategic partnerships in the automotive and technology sectors. His fundamental understanding of these industries helps us develop easy-to-use, problem-solving technology.

Prior to starting Square Root, Chris held operational and strategic roles in several Internet and software companies, including: TrueCar, US Digital Gaming, Pricelock, CarOrder, Wayfare Interactive, Brighthouse, and Trilogy Software. Chris graduated Phi Beta Kappa from Carnegie Mellon University with degrees in Computer Science, Mathematics, and Psychology.

 

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About William Griggs

William Griggs

William Griggs is a product and customer acquisition strategist who has helped numerous startups including companies backed by Andreessen Horowitz, FLOODGATE, & 500 Startups. In addition to his consulting work, he has written for Mashable, VentureBeat, & ReadWrite. You can check out his podcast on iTunes (The Startup Slingshot TV) or follow him on Twitter @william_griggs for Tweets chock-full of delicious knowledge nuggets.

In addition to everything tech startups, William loves breakfast tacos, dogs, short emails, and Amazon Prime. He currently resides in Austin, Texas with his beautiful wife Elizabeth.

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