On today’s episode of Startup Slingshot Radio we have Paul Pellman. In our time together with Paul, we cover a lot including: the most important things he learned at Harvard Business School, essential startup sales knowledge, his experience as an EIR, and how he played his cards to get Google to acquire his company.
Have comments, questions, ideas, or feedback? I want to hear it. Tweet me at william_griggs.
Topics Covered In This Episode
- Let’s start by going in reverse chronological order and start with Harvard Business School.
- What did you learn at HBS that continues to impact they way you do business today?
- What’s the biggest benefit you received from attending?
- What did you learn at HBS that continues to impact they way you do business today?
- Let’s fast forward a little bit in your career to your stint as VP, Consumer Direct at Terra Lycos…
- What did you learn in that experience that made you into who you are today?
- Is there anything you learned not to do through that experience?
- Next, let’s discuss your time at Hoovers….
- What 1-2 lessons did you learn at Hoovers that you think are paramount for the startup founders in our audience to know?
- What, if anything, do you wish you could have done differently looking back?
- After your time at Hoovers, you went on to serve as an Entrepreneur In Residence at Austin Ventures.
- What did you do as an EIR?
- What were you looking for?
- Why join a company?
- Why not just start a new venture?
- What’s the thought process?
- What did you take into consideration?
- Why did you decide to join Adometry?
- What was the situation?
- Was the founder still there?
- As an EIR you joined Adometry as the CEO
- For those unfamiliar with Adometry, what is it?
- What’s your proudest moment during your time there?
- What do you think you got right at this company?
- In hindsight, what was the biggest mistake that you with you wish you could go back and change?
- Looking back, if you had a genie and were granted 3 Adometry-specific wishes, what would they be?
- While you were at Adometry Google came knocking
- How did the acquisition go down?
- Why did this acquisition make sense?
- How long does something like that take?
- When do your employees get to find out?
- What’s the thought process around not sharing the acquisition price?
- How does Adometry operate inside of Google now?
- Are you able to pull additional resources from Google?
- If people want to connect with you or learn more about Adometry, how can people do so?
William: On today’s episode of Startup Slingshot Radio, we have Paul Pellman. In our time together Paul we cover a lot, including the most important things he learned at Harvard Business School, essential startup sales knowledge, his experience as an EIR, and how he played his cards to get Google to acquire his company. Enjoy. All right, Paul, thanks for joining us today.
Paul: Absolutely. Great to be here, William.
William: Yeah, really appreciate your time. The audience appreciates your time. In our time together for this episode, I want you to help our audience shortcut their path to success by diving into your experience, pulling out actual advice, wisdom, lessons learned, that they can use today. How does that sound?
Paul: Sounds great, excited to participate.
William: Very cool. Let’s start with basically going in a little bit of reverse chronological order, and start with your experience at Harvard Business School. A lot of entrepreneurs in the audience, they see a Harvard business school, they’ve probably met people who have gone to Harvard Business School, but they’re not sure if it’s the right fit. What about your experience at Harvard Business School, and what did you learn there that has stuck with you through your career?
Paul: Yeah, there’s a lot in that question. I think really the decision… first, it was really the decision to go to business school, why was it something I decided to do? For me, I really saw it as an opportunity to shift my career. I had started my career after college in public accounting. And I enjoyed that, was a lot of fun and challenging, but at the end of the day, I really started to realize that I didn’t want to be accounting for other people’s decisions. I wanted to be making decisions, and I thought the best way to do that, and jumpstart that, or create that opportunity, was to go to business school. So I applied and was fortunate enough to get into Harvard. As far as what I learned there, I’d say the biggest thing was just learning how to think differently. That’s really it.
Harvard, and I’m pretty sure they still do this, it’s 100% case study, which means you’re given a document, a case for every class, every day. And you read that, and through discussion you learn how you do things differently in what you do. So you never read a textbook or taught anything by the professors. Every class is a discussion, where you end up getting to the right decision. I liken it to learning to tie your shoes. When I was five years old, learned to tie my shoes. Well, I tried to do it on my own, and it was very frustrating. But when I finally figured it out, it really stuck with me, and it created a great learning moment.
I think that’s how Harvard addresses it, which is you’re given this case, and it’s messy, and there’s all sorts of extenuating circumstances, and they don’t give you the answer. You have to figure it out, and you don’t know what the answer is. The process of going through that, I think when you get to the end of the discussion in class and the answer starts to reveal itself, I think it ends up creating a situation where you just learn more effectively.
All that, I think, ties into just thinking differently, and I think it really emulates what you get in a business environment, especially in a startup. It’s on steroids in a startup right? Things happen so quickly. You’re typically dealing with radically new concepts, ideas, because it’s a start up, it’s not this business that’s been around for 10 or 20 years. You never have perfect information, and I think business school, especially at Harvard, I think teaches you that. That’s something, I think, that sticks with everyone that graduates.
William: That’s very interesting. Thinking differently through that case study method, they give you the case study, you analyze it, and it sounds like…correct me if I’m wrong, then you present, or you get called on inside the classroom to take a side. So part of the learning or thinking differently is obviously reading through the examples and putting yourself in the case study, in the shoes of the person in the case study. It’s also seeing someone else’s perspective, right?
Paul: Yeah, I think that’s it. You’re exactly right. We’d be given the case, you’d read it. Typically you’d meet with . . . we do group studies, so I had three other classmates of mine in the first year, that we got together every evening, pretty late in the evening, and we would discuss the cases for the next day, and it was almost like a mini discussion, right? We’d get our facts straight, understand, have that discussion. Then we’d go into class with the rest of our section mates, we’ve got 80 people in each section. And the professor really would guide the conversation, he or she would call on people in class. I think the professors that are really good at Harvard Business School get a feel in the class for who has certain levels of expertise, and they have a way of guiding the conversation that gets you to the outcome.
I’ve seen it. You can tell. After you’ve gone there, you can really recognize the really exceptional professors from ones that aren’t that good. The exceptional professors help you come to the right conclusion, or help you get to the destination, but you’re doing it, or you and your classmates are doing it. That’s what I think…like I said, that’s what I think creates that great learning moment.
William: Right, and it seems like the benefit from their going forward is, when you’re faced with a problem, you’re able to attack it from multiple directions, is that right?
Paul: That’s right, and a big aspect is, you’re never given perfect information. I think being able to be decisive and draw a line in the sand and move forward, that is really important in a startup. And it’s really hard in a startup, because like I said, usually you’re dealing with really new things. There’s . . . again you don’t have 10 or 15 or 20 years of history or background for the business to fall back on. You’re really asked to figure something out, and a lot of times, it’s just making a decision in and of itself is what you need. Even if it’s the wrong decision, sometimes making a decision is better than not making a decision. I think business school helped me learn how to do that more effectively.
William: If people in the audience are currently running their business, or they’re currently in a career, they can’t stop what they’re doing to go get an MBA, there’s opportunity costs associated with that, didn’t make sense for their career trajectory, how can they…do you have any ideas or any thoughts about how they can create the similar experience, maybe in the professional setting?
Paul: Yeah, I don’t want to emphasize that everyone has to get an MBA. I think it’s really different for every person. For me it was a wise choice, I’m glad I did it. But I’ve met plenty of folks that have been wildly successful and are incredibly entrepreneurial and incredibly decisive without going to business school. I think they’ve learned that capability through their work experiences, or through just their innate capabilities. I really think business school, at least for me, it helped hone that, or build up that muscle. I do think that there are other ways to do that, and I think part of that is…yeah, some of the ways of doing that are if you’re in a bigger organization, finding folks that you work with, or leaders in the organizations that can serve as mentors, both in your company and maybe outside of your company, that you can you really ask for feedback or advice. That’s one aspect of doing it.
Then I think plenty of books on the side that you can read, to help further and be this lifelong learner. Taking into account that even though I went to business school 20 some odd years ago, I don’t think I ever stopped learning. Matter of fact, the Internet wasn’t event around way back then. Everything I’m doing now had nothing to do, from a functional standpoint, what I learned at business school.
William: Yeah, as far as…it seems like a lot of the people in the audience, they could have those kind of cross functional networks inside their organization, whether they’re talking with people in another function, they have a different perspective a different set of experiences. I know a lot of entrepreneurs try to have a mastermind experience, where people that are coming together have slightly different experiences, similar goals, so they’re gonna come at the problems differently. Then obviously, like you talked about, books, podcasts are great, like this. As far as books, are there any specific ones that come to mind, when you’re thinking about this type of stuff?
Paul: As it relates to this, to me, one of the best books, it’s a classic, is Clayton Christensen’s book on just disrupting industries. I’m forgetting the title of the book right now. All of his books are great. Everything around disruptive industries and how you work at it, it’s perfect, especially for an entrepreneur or someone in the startups, because what you’re doing as a startup is trying to be disruptive, and to do something better, do something new. More than likely, you’re disrupting some existing established business that’s out there, so that’s a great book.
Another one that I’m a huge fan of on a different topic is a book called Made to Stick. A fantastic book, as it relates to learning how to present more effectively. The whole concept of the book is how do you make your presentations sticky? And it goes through that. It’s a fantastic book. We used it, and we’ve used folks that are trained in that, that are basically experts in what that book preaches, to come into and teach our sales team. I really felt that at Adometry, one of our competitive advantages was our sales and marketing execution. A big chunk of that was just leveraging some of the principals in Made to Stick to just be better at making our presentations memorable. Making them tangible in the eyes of our customers and prospects, and just being seen as helping clients better understand what we do. And that helped us sell more effectively. So those are two off the top of my head that I think are really good.
William: Yeah, I think that first one’s called The Innovator’s Dilemma, does that sound…
Paul: Yes, that’s it. Innovator’s Dilemma, a fantastic book, incredibly relevant for anyone that’s looking to start a startup, or be involved in an early stage venture.
William: Yeah, they eventually came out with another one, a sequel of sorts, called The Innovators DNA that I really enjoyed, which is all about what do innovators do that allow them to come up with these creative concepts, whether it’s networking, experimenting, observing. All these different kind of things that are actionable that you can do to try to spark these innovations and actually move the world forward.
Paul: Yeah, and I really think Clayton Christenson really is…I really think of as, in my generation, just really one of the major business thought leaders. He was at Harvard Business School, obviously. Still is, I think, and I think has really done more in the last 15, 20 years to really advance the state of business thinking. So he’s really, really fantastic.
William: Yeah, let’s fast forward a little bit in your career towards your stint as VP of Consumer Direct at Terra Lycos. Talk to us a little bit about what you learned, and what has stuck with you since those days.
Paul: Sure, I have to describe what that means a little bit. Most folks, I always think the over-under on remembering Lycos is about 35 years old. So if you’re over 35, you probably remember Lycos back during Web 1.0. One of the early portals, like Yahoo, was super successful in Boston, but like a lot of the other portals, fell on hard times. I was there through a lot of that process. My role was essentially marketing, responsibility for all marketing for our subscription products.
So Lycos was a big portal, but we also had a lot of fee-based subscription products, the biggest one being a dating site. Dating sites are very popular now. Back then, dating sites were really just getting off the ground and just kind of hitting that first wave of adoption. It was really The Wild West in online media, because all these dating sites…and classmates.com, if you remember back then, and dieting sites, online dieting sites. They were pretty much the only folks buying digital media during the, what I like to call “the nuclear winter” of online media in 2001 through 2004. That was when the bloom was off the rose of the dot-com space, and all these companies that were just making gobs of money started going south, because all those advertisers that were paying these gobs of money started to realize it wasn’t really working as they thought, so they all pulled back. It was obviously before Google got started, so there wasn’t any paid search.
So I learned two things, and I guess one point in general, I think is really helpful is sometimes if you’re in a really bad situation as an executive, or as an employee, or contributor in a company, sometimes those create the best learning experiences. Because you learn what not to do, frankly, right? Or you learn what to do, because you see glimmers of hope or beacons of positive energy that’s trying to buck the trend within a bad environment. I was at Lycos when we were going through a pretty significant, slow, steady death spiral. The company was shrinking every year, pretty dramatically. We would lay off about 20% of our staff every six months. It was a pretty grim place to be. From that standpoint, I think there were a lot of things that the company did wrong, as far as how they handled company culture, what they communicated to folks, how individuals on the team reacted. I learned a lot in those experiences.
Look, when times are tough, there are certain ways you should act, and certain ways you shouldn’t act. I think a lot of the things that Lycos did, that they did not do that well, I really took to heart to make sure I was never in a situation where I would do those type of things, right? If I was in that situation, or we were in a period where we’re going through a tough spell, I would do things differently. So I thought that was a great learning experience.
Now, on the positive side, the role at Lycos for me was the first time I was knee-deep…I shouldn’t say knee-deep, I should say neck-deep in the digital media, buying tons and tons of digital media to drive transactions. It was all about buying a bunch of online media to get people to register for the dating site and get people to ultimately subscribe to the dating site. And I had had, before Lycos, a significant amount of experience in the direct response industry. Direct mail and telemarketing, bunch of businesses in that space, and it was really the first time I was able to apply that in the digital space, and understand the power of digital, with the volume of data that you have access to, and the ability to measure things a million different ways. That creates challenges too, because you can measure things a million different ways. How do you figure out what’s really working?
So it was a great experience from that standpoint, and really, I think, it took me from dabbling in the Internet space to just going head forward in the Internet space. Again this was back around 2001 or so, 2002, when I think that shift fully happened. Again, over-all really great experience but across a couple of different fronts. Great experience from a domain perspective, and also I think great experience from a culture, and business process, and strategy standpoint.
William: Can you give us a couple examples. You talked about the tough times and things you would probably do different than Lycos, and I would say Lycos is history now, so it’s less sensitive, right?
William: What would be some of those examples, where you’d be like, “Oh, hell, no. I’m not gonna do XYZ that way. I’m gonna do it this way, going forward.”
Paul: Well, I looked at it as I was operating in the only part of the business that was actually growing, right? The subscription businesses that time were growing pretty quickly. Now, the media business was shrinking dramatically. So, yeah, at the end of the day, we were working on some pretty exciting stuff and some leading edge stuff. And what I found is I found a lot of folks in the product team and engineering team that were living in the past, right? They were living in the glory days, only a couple of years before that, where they felt they were really successful, only because they were flowing with the current of success. And when times got tough they just stopped performing, or just were more negative than positive, right? They couldn’t find the opportunities to be positive. Hey, I know everything’s kind of crappy right now, and the business isn’t doing well, but nothing’s doing well in the digital space at that point and time.
To me, it was just an aspect of taking personal responsibility to find those positive nuggets and try to turn something…turn it into something. And what I found at Lycos is I had the benefit of working with a lot of different product teams, so I found that some of the product teams I could actually…we could be that beacon of light that could get people pretty excited and motivated, and really start contributing. And there were other parts of the organization we just couldn’t get that, so to my team I was like, “Well, let’s focus on the folks that wanna work with us, and let’s at least find success or create some success in this environment, and maybe the other folks will see our success, and that’ll help them turn over a new leaf, or change their perspective.
So I think a lot of it was just attitude, which is as an individual, I can choose to be in a dour, negative mood, or I can choose to be in a positive mood. I can choose to contribute, or try to contribute, or I can I can choose to be a doubting Thomas. So I thought that was a big aspect of it, that so much of it is just each individual’s…they have a choice on what they wanna do. It’s kind of the whole “will and skill” issue. Lycos had a lot of people with the skill, but when times were tough, a lot of them didn’t have the will. So I think for me it’s making sure that when you build a team, that you’ve got a team of folks, and you’re constantly looking at folks that don’t just have the skill, but they also have the will to be successful.
In a startup, you’re gonna have challenges. It is not always easy. It’s the highest highs and the lowest lows, and you wanna make sure you have a team that’s gonna rally and grit their teeth and get through those tough times, ‘cuz just will themselves to be successful. At Lycos, I saw a lot of folks that probably came in at the tail end of the success, and they just didn’t have that intestinal fortitude to get through those hard times. That, to me, was the biggest thing, that it all comes down to the people, and the people you hire, and the people you work with. And you just have to look for that intestinal fortitude.
William: So you think it was more of a hiring and filter, or filtering the actual candidate issue, rather than like a lead by example, the executives were [inaudible 00:19:16]
Paul: No, I think you have to do both, right? As a leader and an executive, you have to help people do that, and I think you just want to have team members that can embrace that. You look for folks that can do that. I think you always don’t have to be concerned as a leader about having rose-colored glasses on, where you try to turn everything into a positive. It’s always a balancing act. At Adometry, look, we started life as Click Forensics, and I know we’ll talk about this later, but we struggled through some of our early efforts there. And I think the aspects of being a great leader are being able to be transparent with your team, but being able to find the positive aspects of “This is what’s going well, this is what gives me hope, this is the vision of where we’re going. Here’s why I still think we’re going to be successful, even though you can explain a lot of the in veneer term challenges that you have.”
So you can’t just blissfully ignore a lot of the challenges that are in front of you, but I think a leader’s goal, specially through those tough times, is to lead through those things, point out the things that are going well, and also make sure that you’re bringing on the right kind of people that have that intestinal fortitude to be on that journey with you.
William: And then as far as people in the audience bringing on new people, how do they look for that will? Is it just something that they should feel in their gut? Should there be past examples or something that people can point to, to say, “Look, I have this,” or not?
Paul: That’s a great question. We could spend hours talking about how do you interview and find the right people on the team. This goes back to VCs when they fund companies. It’s always about the people. I think it was Fred Wilson at…I [inaudible 00:20:58] he’s with, really prominent venture capitalist based out of New York. He did a blog post. this is a while ago, and I remember reading this probably six, seven years ago, when we were going through our pivot at Adometry. He wrote a blog post looking back at his 10-year investment history and looked at all the companies that had been successful, that he had invested in. And he found that, I think 70% seven, seven zero percent, ended up being successful through a different business model, pretty significantly different business than what they were originally funded under.
Now, that doesn’t mean they started life trying to be a search engine, and they became an automotive company, right? It wasn’t that kind of change. It meant they got started in one vision, they had a vision, and they had to alter it pretty significantly to be successful. And his point on that is, it’s all about the team. You need to hire a team that’s able to do that, that’s able to get through that. No startup has a Soviet Union five-year plan that goes perfectly, right? Something always changes, or many times it does. And I think that’s the aspect of what you look for when you’re recruiting folks, is you want to ideally be able to see folks that have had that prior experience. That’s the best situation. But it’s also making sure that they weren’t just floating with the current in a successful organization, that they were actually driving some of that, right?
The best ideal is the candidate that came through prior experiences, where it was a really a tough time, and they were able to overcome that, or get through that, and be successful. That doesn’t necessarily mean you always have to be in a startup. That can happen plenty of times in bigger companies and bigger organizations. So I think that’s part of it, and for the folks where you can’t maybe discern that in their background, I think it’s through some of the questions you ask.
I’m a big fan of asking behavioral and theoretical questions of candidates. I don’t use an interview just to…I can read a candidate’s resume, or a candidate’s LinkedIn profile and understand what they did in the past. And I’ll of course start an interview by asking backup questions to that, right? To get more insight on maybe what’s not on their resume. But then I’m gonna shift gears and talk more behaviorally and theoretically where I’m gonna ask open ended questions to see how the person thinks, or how they reacted to certain specific situations.
I think through that, you try to glean…do they have that intestinal fortitude, that capability? And I think when you expand that to more senior level folks, leaders on your team, I think then you really start digging into reference checks and prior experiences, to really make sure those folks do it. Like hiring a client services rep, obviously I’m not going to be able to get lots of that prior experience potentially by hiring a CMO or a chief revenue officer…those executables, I’m going to very specifically be looking for prior expertise and experience in getting through those tough times, making sure people have that intestinal fortitude, all that kind of stuff.
William: Yeah, those are great things to drive home. Talk about hiring, talk about leading. Let’s fast forward a little bit to your experience at Hoover’s which is obviously an Austin based company here. Tell us a little bit about what you were doing at Hoover’s.
Paul: Yeah, that’s what ultimately got me to Austin. I came into Hoover’s, after it had just been acquired by Dun and Bradstreet, to run marketing. I think Hoover’s at that point had been and really turned the corner one of the few examples of a business that had been in the first wave of the web, successful as a media business, and they were able to pivot to success as a subscription business, which is very hard to do. They were just starting to get some really good traction on that. I think a lot of that success had been in spite of Hoover’s marketing capabilities, so my goal was to come in and really juice the marketing efforts to accelerate the growth, which we were able to do.
I think when I came in, the company was about 25 million in revenue, and three years when I left, we were a little over 100 million in revenue. So we were able to have some pretty dramatic solid, strong, growth, and we did that by…I think before I got there, the site and the marketing team generated about 1500 to 3000 monthly leads for the sales team, and we turned that into 30,000 leads for the sales team. We actually qualified that down to 7,000 phone leads, which are the kind of leads that sales people like a lot better, ‘cuz it’s someone on the phone willing to talk to them, versus a web form lead, where they have to get the person on the phone. So a lot of that helped drive that success. Then at the last nine months to a year, I moved into the present role as running the business. So it was a great experience.
I think the thing that I really took out of that experience was it was the first time I had worked in more of a B to B oriented company. Where before that, Lycos, I was driving a bunch of consumer-oriented subscriptions. We didn’t have a sales team, right? I would do marketing activities, or run our marketing efforts, to get people to register and subscribe. We didn’t have sales people following up to sell $20 a month subscriptions, where at Hoover’s we did. We had a 100-person sales team that was following up on all these sales leads. So that was a huge learning experience for me. I had not dealt with that before, and learning how to work with the sales team and just dumping 30,000 leads onto a team is really not that beneficial. You have to turn them into the kind of tangible asset that they can actually use and drive business. We were overwhelming them.
Working through a lot of those challenges, getting a lot more product experience in driving our product roadmap, because marketing included product, that was also really new for me. And it was just a really great experience. Hoover’s, at the time I was there, was just a great, great company, had a great culture. I think we were able to maintain that culture, even though we were part of Dun and Bradstreet, at least the time I was there. So it was overall a really good experience.
William: And as far as the marketing experience, you said that you took from 3,000 leads to 30,000 leads. Do you remember some of those tactics? Was it opening up new channels? Was it just doubling down on what was working?
Paul: It was all of that. We definitely just…a lot of it goes back to, you have to measure things more effectively, understanding what’s really working so you can do more of that. I know that we just weren’t tracking things as effectively as we could, so improving our tracking and our measurement, and then once you have a baseline of results, then you can start iterating and testing to improve results. Because then, when you do a new test, you can actually see if it works or not. And if it works, then you do more of it. So just building that culture and the systems to support that “test and learn” process, and bringing in folks on the team, and expanding the team that had more that kind of experience.
We just didn’t have a very big team when I first got there, so we augmented and built the team, and brought in a lot of folks that had prior digital media experience, to help drive those activities. It was change in the way we did search marketing, adding new channels like display advertising, and email marketing, and then doing a much better job of our conversion marketing efforts, which was once visitors came to the site, increasing the success rate of turning them into leads. We did a lot of tests on our website to try to improve performance. So it’s just a lot of block and tackling to drive those results.
William: A lot of the people in the audience also are first time CEOs, and either they had functional experience, a lot of them have functional experience in technical fields, some of them in marketing, some of them in product. Most of them, at least that have emailed me and talked to me a little bit about it, have not had the experience in sales, so as they’re growing their team, they’re having to work with sales people, and they don’t have that experience. From your experience to date, what are some advice, or what some pieces of advice you could give to them about sales and how they’re…sales people, and how they’re motivated, and sales strategy?
Paul: Yeah, again, we could spend two hours talking just about that.
William: I might have you come back.
Paul: Yeah, the first thing is I think if you’re an entrepreneur and you’re looking to start a company is, I think you have to look at, okay, what’s the purpose of the business? Obviously, if you have more of a business to consumer-oriented business, your sales requirements are gonna be different than if you’re selling a software package or a SAS solution to enterprises. You’re obviously going to need a sales team, right? And you’re gonna need a different type of sales team if you’re selling a product like Hoover’s, which is $5,000 a year, or $10,000 a year, versus a product at Adometry, which can be $500,000 a year, right? They’re completely different sales processes. So you need to build your sales and marketing organization to maximize it, to fulfill the type of product or service that you’re selling. They’re very different.
Selling 5,000 of your products can be more of a tele-sales operation, much more of a high-volume lead gen game, versus selling 500,000 or $1 million solutions going to be, “Look, there is a thousand companies we can sell to, we know who all of them are.” So your marketing and sales efforts…sales lead time and sales cycle is going to be six to nine months versus three weeks. All that comes into account as far as how you build your sales organization, and the sales executives, and sales leaders, and sales people that you hire. Sales executives and sales leaders that are really good at telesales are not necessarily going to be really good at enterprise sales. They’re completely different skill sets. So that’s the first thing, when you’re looking at the kind of team you need to build. The other thing is I think you need to make sure that you’re not just looking at it as a sales issue. It’s a sales and marketing issue.
Now, sometimes marketing takes the lead, sometimes marketing’s in support. For that enterprise sales, $500,000 and up, that’s much more of a sales lead marketing support, but I think when you get to smaller transactions size and much higher volume, then it becomes a little bit more of a marketing-led sales support. So that also comes into play, and I think that’s really important for the first time CEO or the entrepreneur to really understand how you need to structure your sales and marketing operations, before you start putting people into those slots.
That’s one side, now let’s focus a little more on the more enterprise-oriented sales leaders and how sales people operate. Everyone likes to joke, “Sales people are coin operated.” That’s, to a certain degree, definitely true. They are gonna be your highest compensated, from a cash standpoint, people on the team, but that’s because most of their compensation is gonna be at risk, based on how well they do. So I think the goal is always to make sure that, at least from my perspective, that you find sales execs and sales leaders that have that killer instinct, and that are coin-operated, but are able to do it with a focus on the team.
We always talked at Adometry of not wanting to have any lone wolves. We wanted team players that were on the bus, that wanted to have the entire organization be successful. Now, they wanted to help drive that success, and they had strong individual goals, but they wanted to do it within the context of the team. I think that’s really important. The other thing I think that’s really important is make sure you hire sales folks that know what it’s like to be in a startup and can handle the uncertainty, right? They’re gonna be selling a product that’s not that mature, or typically a product that’s more of an evangelical sale. Most startups are selling a product that’s never been sold before.
Having folks that are comfortable reaching out to a marketplace to convince people to think of something, or buy something they’ve never thought about before, or to think differently about what they buy, that’s a certain skill set that I think is really important. Then, I think from a sales leader standpoint and running that organization, you just wanna make sure you’ve got someone. In my perspective, someone that can really motivate and drive a team, that can manage by the numbers, is really good at managing the numbers in the pipeline and can give you very accurate forecasts of where you’re gonna come out, but is also able to motivate and drive the team to success. Because a lot of sales success is just, again, the will to be successful.
At Adometry in particular, we talked a lot about…we had two sayings at Adometry. Said one, we wanna own the desktop of a CMO. Great way to have the whole company understand, “Here’s our vision, here’s what we’re trying to do,” and make it very tangible. Then the other one that we talked a lot about, and this resonated more with the sales team, and I think resonates in Austin pretty well, is we wanted to be like Omniture and not like Coremetrics. That takes a little bit of explaining for folks that might not have the history, but Coremetrics was founded in Austin, was really the first web analytics player to not be an enterprise level back-end solution, the first SAS solution for web analytics. There were then seven other competitors, one of those being Omniture. When everything shook out, Omniture was wildly successful and Coremetrics less so, right?
Coremetrics raised ten rounds of financing and ultimately sold to IBM. Omniture went public and sold to Adobe for billions of dollars. Why was one more successful than the other? Well, it wasn’t because of product. Coremetrics had a better product. It’s because Omniture out-executed everyone else in the space from a sales and marketing standpoint. They invested more in it, and they took it more seriously. We had other competitors we were fighting against in the attribution space. We still do. And we were able to more than win our fair share. I think because we did have a better product, but it was very close. The other reason we won a lot more is we just out-executed. We just worked harder at winning. And I think that stuff matters. A lot of that is what you want to look for in your sales team, to make sure that they have that capability to just out-work the competition.
William: That is a lot of great sales advice in there, a lot of the great sales management advice. People should probably rewind and listen to it again. We don’t have time to unpack it and dig a little bit deeper. Let’s fast forward to your next stint, which I believe was a entrepreneur-in-residence position at Austin Ventures, is that correct?
Paul: Yeah, that’s right.
William: How did that come about, and what all did you do while on the job?
Paul: I’d met the folks at Austin Ventures while I was at Hoover’s. They had always had a standing invitation to come on board if I ever got tired of working for a company that was owned by D and B, which ultimately happened. The entrepreneur-in-residence role is really a great role, at least the way Austin Ventures configured it, which is it’s almost a cathartic role. It’s very open-ended, so my goal in being there was to explore a couple of investment ideas for creating a new business. One was a potential buy-out of a small business and just investing in it, bringing it to the Internet age. And the other one was a completely new idea. And then in the midst of while I was there, I also got really involved and met with a number of existing portfolio companies.
The goal is of an EIR, it’s not meant to be a permanent long term position. It’s meant to be a transitory position, where you figure out what direction you want to go. You either come up with a great idea that at that time Austin Ventures would fund, or you move into a portfolio company, and I want that latter route. The investment ideas I was working on were pretty good, but one concept to buy a company, I actually recommended we not go forward, ‘cuz there were some really significant issues with the company that I thought hindered our ability to be successful.
Then the process of working with a number of portfolio companies, it really resonated to me the capabilities and the vision of where this company called Click Forensics was going. And so in the midst of that company raising a Series B, it was pretty evident that they needed a CEO, and it was something that I got really interested in, so then I came on, and I did that. So it worked out really well. So I was pretty happy with that.
William: You talk a little bit about a perspective from the EIR and the VCs where they would think specifically like, “Okay, this company now needs to bring on a CEO.” What do they see inside the business? What are they thinking when it comes that time?
Paul: Yeah, it’s a sensitive topic, because you have a lot of entrepreneurs and founders that start a company and . . .
William: Yeah, and part of the goal is to expose this to the audience so they can maybe build up some of the strengths, so they don’t get into that position. But continue.
Paul: Well, or I think it’s one of two ways. There’s another company I was an advisor for, where I felt that the founder knew in the very beginning that he was not the long term CEO. So even though he started that way, he knew that ultimately he wanted to bring on a CEO, because he recognized he was more of a technologist. So I honestly think, sometimes for a founder, I think they need to go into it eyes wide open and say, “Do I really have what it takes to be the CEO if this company as successful? Am I willing, right at the gate, to recognize I might need to bring someone in?” So I think that’s important to figure out. I’m not saying that’s the case for every founder. I think there’s plenty of founders that are very successful and can be the CEO, but I think it’s important for the founders to do that self-evaluation process.
I also think it’s important for the founder to realize, “Okay, if the company gets to that point, where do fit? What’s the functional area that I can move into? What can my role be going forward if they do bring in, or the company does decide they need to bring in a CEO?” I think both of those are really important to decide. Now, why does it happen? Why does a company need to have a CEO? Well, it’s because the company is getting to a level where it’s getting outside of the founders ability to be successful.
There’s plenty of founders that are able to step into the role and learn on the job and rise to the occasion to be the CEO. But there’s also plenty of situations that’s just really hard to do, right? Especially if the company is having success, So that’s a point where I think the BCs look to say, “Look, we need to bring in someone that has some of that expertise and experience, that can help take this company to the next level, can help maximize the success that is possible.”
William: Yeah, and obviously they’re putting a large chunks of capital to work inside these businesses. They want maybe to secure up their investment a little bit. Maybe it depends on each case. Is the thought process really like a market strategy? For instance, now we have to go into these other verticals, and the current CEO only has experience in this one. Is it more a cultural thing where now we have 300 employees, or trying to go to a thousand, and managing that, overall, is going to be very difficult. So I want to bring in someone more senior. Does it come to those kind of skills?
Paul: Any of those. Any of those things can happen. I don’t think there’s any one prototypical case. In our situation, I think it was just a case of, at Adometry, or at that time Click Forensics, it was just bringing someone in that could manage the business. It just wasn’t being managed, and it wasn’t, from a strategic standpoint, wasn’t going down the right path. So bringing someone in that could right the ship a little bit, and build up a team, and set a vision, and execute against that vision, was needed, so that was our situation. But I do think every situation could be different. It can be exactly any of those things you talked about.
Sometimes a company gets so big, it just gets outside of the capabilities of the original founder, or the CEO that’s currently in the role. He’s almost a victim of… that person is a victim of their own success, right? The company’s gotten so big and so successful, you need someone that has that experience that come in and take it to the next level.
William: Are there certain skill sets that you think every CEO like…I guess one question would be like, if you’re coming into this company, what is the set of skills that you felt like you had to bring to this company?
Paul: It relates to Click forensics. I think I’d had prior experience managing, building, and leading teams. I had great domain experience, and history of success at driving that kind of success. That’s what led for me to move into this role, and like I said, it ended up being very successful. I think for the founder, if the founder’s looking to be the CEO, it really is about being able to lead the team. That means hiring is super important, being able to set vision, set strategy, make decisions. Build your team with the right folks that can help you do that more effectively. Sometimes the founder, like I said, is able to step into that role.
There’s plenty of examples of founders that have been able to create the company and be the CEO and be very successful at it. There’s also examples of founders that we were able to get the company to a certain point, bring in the right CEO, and the company’s been able to have success from that standpoint too. It really depends on the person. Sometimes I’ve seen founders really realize they don’t want to be that CEO, they’d rather move into being the chief product officer, or the chief technologist, or things of that nature, as opposed to being solely responsible for managing the entire company and everything around it. CEO, a lot of times you’re raising funds, you’re doing a lot of things that early on as an entrepreneur might not realize the big aspects of what the CEO does.
William: So you are an EIR at Austin Ventures, you join Click Forensics, became Adometry. Eventually, Google came knocking. Can you tell us a little bit about how that relationship came to be, and how it all went down?
Paul: Yeah. I always liked the adage, “Great companies aren’t sold, they’re bought.” A lot of what we were focused on was building momentum. Look, we had financial investors, so we knew we had to have a liquidity event. The goal was to have a liquidity event. That’s either going public or getting bought by a strategic acquirer. I think for us, the outcome was much more likely to be a strategic acquirer. Some of the ways that happens are you put yourself out there, you have success, and part of the job of the CEO is to create relationships with potential buyers so that they know who you are. Also that when someone comes knocking like Google, you know the state of the other folks, the other players to recognize are there other opportunities to get other people involved? Is this something where we should put together, hire a banker and run a process, versus just going forward with this one company? These are all decisions you need to make.
In our situation, for the two years before Google came knocking, we continued to see strategic interest from a number of companies. Now, I’ll say that the caliber of that strategic interest became stronger and stronger over time. Two years before Google bought us, we were getting interest, but it was pretty easy to look into that, and realize that was not a good option for us. A lot of them were other privately held companies that were bigger than us. Then it started to be publicly traded companies, but with pretty small market caps. And at that time we knew we’re on to something pretty big, and we had a vision of what was the right exit for us. So when Google came calling, obviously that was the Pinnacle, frankly. It’s about as good as it could get.
I think the thing that was really key during that stage is I knew the state of the other folks that were out there, and I knew that at least at that time a lot of the other bigger players…there was some interest from some of the other bigger players, but not this interest where I felt like, “Hey, lets run a process, because we got like seven or eight companies and they’re all gonna want to bid on us.” That allowed us to just continue moving forward with Google, versus trying to run a process to force the issue. I think that’s an important distinction for a founder, which is a lot of times the reaction is, “Hey, let’s hire a banker, run a process so we can get a bunch of companies interested, and sell to the highest bidder.” The challenge with that is a lot of times with these big strategic buyers, you get one opportunity to get in front of them. And you of can blow your wad to a certain extent.
If you run this process, you’re telling the strategics you are going to sell to someone. If you’re not successful, or if they pass and no one else buys you, you’re damaged goods, and it becomes really difficult. So that is a really hard decision to make, and it’s one we went through. We went through this process, “Do we hire a banker, do we not hire a banker?” I think frankly, the decision to not hire a banker was because I had had relationships with Adobe, and Epsilon, and Experian, and the list is endless, all these other companies that were other potential buyers for our business…Facebook, Twitter.
I knew the state that there was some interest to do something, but it wasn’t strong enough. I couldn’t force their hand. If we would have known that, “Look, all these folks are chomping at the bit,” then we would have run a process. But instead, it’s like we knew that, “Look, we need to take this through with Google, and see where it ends. If Google ultimately doesn’t do it, it doesn’t hurt us with everyone else. We’re still this great company. We haven’t put ourselves on the block, and allowed ourselves to be looked at by everyone, and allowed everyone to pass.” So that was an important distinction. We did have AOL bidding at the same time, so we did get both of those companies bidding, and that helped us a little bit. But again, hiring a banker and running a process, it was pretty clear that would have had the chance to hurt us more than it would’ve helped us.
William: Gotcha, that’s really fascinating, just a peek behind the curtain to think through that. I know it is for the audience as well. That’s really cool. As far as the acquisition price, can you share what that was?
Paul: No, we haven’t disclosed that. I can tell you we’re very happy with the outcome. It was at a price we were happy with, and it was a great exit for our investors and for our employees. But a lot of the way, at times, this works is a big company never wants to disclose the acquisition price, and they don’t have to if the purchase price is under a certain percentage of their market cap. I think that’s how it works. So obviously, because Google has such a gargantuan market cap, lots of deals in the billions, pretty much, they don’t have to disclose the price, and they don’t.
Most of the deals they do, they never disclose the price. And we didn’t. But I can give you feedback if AOL…so AOL ended up buying one of our competitors, and they paid a significant amount less for our competitor than they bought for us, and AOL did disclose the amount. That’s because it met that ratio, as far as a percentage of AOL’s market cap. So that’s why that stuff happens. Like I said, it’s a good exit, we’re very happy with, but I can’t share what the amount was.
William: So they’re not forced to disclose it, even though they’re a public company, like you say, because of the percentage. But they don’t . . .
Paul: Yeah, because it’s not material.
William: Not material?
Paul: Right, compared to the market cap.
William: And then they don’t want to disclose it, potentially for other acquisition offers in the future? They don’t want to maybe use it as a signal of some sort?
Paul: I guess that’s the primary reason, which is, why disclose it if you don’t have to?
Paul: Is really the manner of it.
William: Now I’ve heard back channel talk around people going around that, by having someone else leak the price. I don’t know, have you ever heard of that?
Paul: Yeah, I think what happens there, is a lot of times if a banker is involved, a lot of times the banker leaks it. Because . . .
William: Yeah, ‘cuz they want to be associated with a big deal or something.
Paul: That’s right. They like the number to leak out there if it’s a nice big number, because it helps justify that they added value. Since we didn’t have a banker, we were able to keep the number confidential.
William: Is there a punishment if you were actually to expose it here, live on the podcast?
Paul: No, probably not. I can’t imagine…there’s nothing Google can do to me if I disclosed it. It’s more just I don’t need to.
William: Part of the agreement, yep, makes a lot of sense. Then as far as like, it all goes down, when do the actual employees…or how do you think about communicating the acquisition to the employees?
Paul: Well, that’s really hard. I think it’s really important to not distract people, distract the team. I did say earlier, we were very focused in this. We were very transparent with the company on how we were doing as a business, and the good and bad of how things were working, and we had monthly company meetings with all the employees, and we’d share financial results or cash burn rates, all that stuff. But I think on some of these things, like potential acquisitions, first of all, we were required to keep it confidential by Google. But secondly, I think there’s this aspect of, at the end of the day, we all have jobs to do.
Look, like I said, I had many companies coming to us inquiring about acquisition, and if I brought it up all the time with the team, it’d just get them totally distracted. So I think it’s really important for that type of stuff, to keep it confidential, just because, again, you want the team focused on driving the business, delivering results. If anything, it makes it really difficult for the leadership team, because it was an immense amount of work going through this. We had to do all that, and still run and lead and manage the business. So being able to do that, I think, is really difficult. But our goal was to announce it to employees right before it was announced publicly, and that’s what we did, and we worked really hard to keep the information confidential.
My other real significant concern was ensuring that inside on this did not leak out, and that employees or customers didn’t hear about this through the grapevine. I think we were very successful in doing that. Now, part of the way we did that is, I always called it the “circle of trust,” from the movie Meet the Parents, right? You’re either in the circle, or you’re out of the circle. So the circle of trust was initially very, very small, just a handful of folks, and we had to expand the circle of trust as we start going down. In the exploratory stages, it was just my chief operating officer and I, and obviously our board. Even the rest of my senior executives didn’t know that we were talking to Google.
Then when Google wanted to start meeting other folks, they want to meet some of our key technical folks, we had to bring those folks into the circle of trust. Yeah, my COO and I talked to them about it. “Look, this is great news, we’re very excited, and we need you guys to be here, and here is what we need you to do, but we need you to keep this quiet. Here’s why.” You know, for all the stuff I just said.
Then, I think as we went further along, and it started to become more and more obvious that Google was gonna make an offer, and as they started asking to talk with more people, we selectively started increasing that circle of trust. And all through that process, just really reiterating with folks, “Look, we really need to keep this quiet.” And also saying, “Look, don’t talk to other folks that are in the circle of trust about this.” Because that’s how these things get out, which is, I say something, inadvertently say, “Hey, you know what’s going on with Google?” And someone says, “No, what’s going on with Google?” And all of the sudden it leaks. It’s unintended, but it leaks.
I think it’s just really important to manage that. It wasn’t just to pull the wool over an employee’s eyes, it was really just, again, “Keep the team focused on delivering, and also let’s not get them distracted. Let’s tell them what we can tell them, when we can.” I think that allowed us to do that, so when we had the Google team out, we had the general announcement to the rest of the employees, I think everyone was really super excited, but a lot of folks were really surprised, pleasantly surprised. They did not know…I guess folks had an inkling, maybe a couple of days before, because we kinda said to our folks that were in [inaudible 00:53:21] “Oh, we all need you in the office on Monday, ‘cuz we have a big announcement.” And we hinted that it was, “Oh, we got some funding news that we’re gonna talk about.
So I think you have to find the right way to do that, so you can still maintain that transparency. It’s really important. But also communicate something like this in the right way, again so you can meet the needs of the buyer, because again, Google’s a public company. We need to keep stuff like this confidential. And also, I think, just for the betterment of everyone on the team, just so we don’t distract them on what’s going on.
William: That’s really fascinating stuff. As far as life now, as a part of Google, how did you all think about that? How did you have to negotiate that process?
Paul: They told us early in the process that most folks would have to relocate, or that they were going to ask people to relocate, and that was really tough for us to swallow. Most of us lived in Austin, and we like living in Austin. I personally really love Austin, and I think we had to come to terms with that, and that’s happened. Most of the team…we had 140 people. About 100-plus people relocated, I think. The 40 or so that didn’t, basically decided to not stay with Google. They were filling out one year or 18 months fixed term arrangements, because they just didn’t wanna move. So that was a little hard, because you have to go through that process of figuring out if you want to do that, or not. I think that was just a situation that, for Google, was really important to have the team physically together, just from a efficiency and productivity standpoint. As far as how we integrated, I think we’ve integrated really, really well.
I think the acquisition, now that we’re about a little over a year into it, is seen as very successful. We’ve continued to exceed our sales and revenue numbers that we set as kind of plan goals, and I think we’ve integrated. The teams have integrated really well with the other parts of Google, but that’s part of the reason Google bought us. Yes, it was because of the technology we had built, but it was also because of the people, and the people on the team. We just synced better than a lot of the other folks, in the space that they talk to. That’s just allowed us to hit the ground running, so all that, I think, has gone about as well as it could have gone.
William: Any tips for entrepreneurs in the audience that eventually get acquired, or maybe they’re going through the process right now, and trying to negotiate or walk through that process with their acquirer?
Paul: Yeah, I think you have to realize the acquirer is buying your company. For me, as the CEO, my role has changed dramatically, and I’ve had to accept that, right? I’m not the CEO anymore. Sometimes an acquired company will look at the CEO or the founder, and they won’t need that person to be there very long, and the founder or CEO may not want to stay that long. In other cases, the acquiring company may want to have their founder or CEO stay for a very long time, and I think the company structure retention packages accordingly.
My situation, they wanted me to stay, they want me to stay, and so I had to come personally to terms with finding ways to stay motivated. It goes back to what I said at my time at Lycos, right? I can choose to be really positive, and contribute, and find positive aspects of what I can learn, and improve my management style, my leadership, what I’m learning, or I can choose to be negative. I’d rather always choose to be positive. Life’s more fun. Now, it’s easy to tell you that. I will tell you that I go through doubts all the time, so it’s a constant challenge, but I always try to go back, and say, “Look, I always rather err on the side of being positive.”
I think for an entrepreneur that’s looking to sell his or her business, they just have to realize they’re giving up their vision, something they gave a lot of sweat, tears and effort to. They’re giving it to someone else, and that company that buys it, may take it in a different direction, or may do things differently, or may structure it differently, and you have to realize that they bought the company. That’s their perogative, and I think it’s being able to let go in some cases, on that type of stuff, is really important.
William: Well, Paul this has been a great episode. Appreciate your honesty, appreciate you peeling back the curtain, sharing a lot of interesting experiences that you’ve had, hopefully to help the people in the audience, the founders, the wantrepreneurs, the entrepreneurs in the audience succeed at building their startup. If people wanna connect with you or learn more about Adometry, how do you suggest they do that?
Paul: It’s easy to learn about Adometry. Just go to adometry.com. Lots of information there, and as far as connecting with me, they can just reach out through LinkedIn. That’s always the best way.
William: Perfect. I’ll put the link to LinkedIn and adometry.com in the show notes below the audio player. Paul, thanks for joining us today.
Paul: Thank you, William.
Paul Pellman’s Bio
Paul serves as CEO of Adometry. A seasoned and experienced sales and marketing operations leader, he was introduced to Adometry through Austin Ventures, one of Adometry’s investors, where he served as Entrepreneur in Residence.
Prior to joining Adometry in March 2008, he was Executive VP of Marketing for Hoover’s, where he was responsible for the leadership of the company’s brand development and marketing initiatives, including customer acquisition and retention, research, strategy, product positioning, licensing, traffic-oriented business development and marketing communications. Paul also served as Interim President of Hoover’s from November 2006 through June 2007. Before joining Hoover’s, he was VP of Consumer Direct for global internet group – Terra Lycos.
Paul has served in a number of executive management roles, including CEO for two early stage start-ups. Paul began his career as a Senior Consultant with a Big Eight accounting firm and holds a B.S. in accounting and finance from the University of Arizona, and an MBA from Harvard University.