NORCAT Entrepreneurship 101 - "Lived it Lecture" featuring Mike Amos, Founder/CEO, Empathica
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Mike Amos, Founder/CEO of Empathica, talks to the students of Entrepreneurship 101 about how Empathica was founded, how they dealt with investors, how they continued to developed their software, how the company fared during the recession and how he learned to sell internationally.
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NORCAT Entrepreneurship 101 - "Lived it Lecture" featuring Mike Amos, Founder/CEO, Empathica
- 1. 10 LESSONS - THE EMPATHICA STORY The content of this presentation is strictly confidential and may not be shared without expressed written consent of Mike Amos.
- 2. 2 BACKGROUND Founded – 2002, Mississauga ON Problem – Lack of consumer insight lead retailers to waste billions on failed promotions and attrite billions due to poor operational execution. Market - $28B market research / $1B mystery shopping Enabling Technologies – Consumer Internet usage + IVR + flexible POS systems
- 3. 3 BACKGROUND
- 4. 4 BACKGROUND Disruptive Components - Real – time data collection = speed to market - High end professional services integrated into a recurring revenue stream - Online (ASP) delivery - Service-based fee structure (SaaS) (+rev visibility / - customer funding limitations) - Team mobilization features - Target buyer and cost positioning
- 5. 5 EMPATHICA STORY ‘02 Founded / Rev.+ – 375k deal with FP ‘03 – CDN Inflection Point booked $3M+ in ARR ‘06 - $7M PE (2M secondary) - US / UK acceleration ‘05 – Chart a New Course - 15% EBITDA - V2 - UK entry - JPN entry 07 – Tidal Wave $11M ARR - 89% Rev Growth, 150% Bookings ‘08 – Go Message = 1.5M Disaster -Launch Campaign - $4M debt 09 – Roller Coaster - 9M Bookings -4M debt covenants breached - $6M debt restructure - 18% decrease in ee’s - Flat Revenue @13M - Go Recommend – has anyone every heard of facebook? 10 – Team Reboot - GR sell in first 12 – Go Recommend -UX Rebuild - Social Intell. - iBank Hired - Senior Ops 11 – Sbux – largest deal in Co. History @ 2.5M - Forrester Argh! 13 – 22M ARR, Acquisition ‘02 Beach Head ~$1M SDM - Angel round $250k 1 10 4 5 6 7 9 2 3 8 11
- 6. 6 1. I HAVE TO SELL? – HOLY S#*T! • You need to be your company’s best sales person whether you close or not • The sales process informs everything else • Investors need market validation • Prospects demand market validation
- 7. 7 EMPATHICA STORY ‘02 Founded / Rev.+ – 375k deal with FP ‘03 – CDN Inflection Point booked $3M+ in ARR ‘06 - $7M PE (2M secondary) - US / UK acceleration ‘05 – Chart a New Course - 15% EBITDA - V2 - UK entry - JPN entry 07 – Tidal Wave $11M ARR - 89% Rev Growth, 150% Bookings ‘08 – Go Message = 1.5M Disaster -Launch Campaign - $4M debt 09 – Roller Coaster - 9M Bookings -4M debt covenants breached - $6M debt restructure - 18% decrease in ee’s - Flat Revenue @13M - Go Recommend – has anyone every heard of facebook? 10 – Team Reboot - GR sell in first 12 – Go Recommend -UX Rebuild - Social Intell. - iBank Hired - Senior Ops 11 – Sbux – largest deal in Co. History @ 2.5M - Forrester Argh! 13 – 22M ARR, Acquisition ‘02 Beach Head ~$1M SDM - Angel round $250k 1 10 4 5 6 7 9 2 3 8 11
- 8. 8 2. TERMS ARE MORE IMPORTANT THAN VALUATION • Understand all the gotcha’s: – Anti dilution – Liquidity preference – Put options – Board and committees – ROFR’s – Drag along dividends – Covenants? Yes, covenants. – Who’s the Chairman? – Number of seats
- 9. 9 EMPATHICA STORY ‘02 Founded / Rev.+ – 375k deal with FP ‘03 – CDN Inflection Point booked $3M+ in ARR ‘06 - $7M PE (2M secondary) - US / UK acceleration ‘05 – Chart a New Course - 15% EBITDA - V2 - UK entry - JPN entry 07 – Tidal Wave $11M ARR - 89% Rev Growth, 150% Bookings ‘08 – Go Message = 1.5M Disaster -Launch Campaign - $4M debt 09 – Roller Coaster - 9M Bookings -4M debt covenants breached - $6M debt restructure - 18% decrease in ee’s - Flat Revenue @13M - Go Recommend – has anyone every heard of facebook? 10 – Team Reboot - GR sell in first 12 – Go Recommend -UX Rebuild - Social Intell. - iBank Hired - Senior Ops 11 – Sbux – largest deal in Co. History @ 2.5M - Forrester Argh! 13 – 22M ARR, Acquisition ‘02 Beach Head ~$1M SDM - Angel round $250k 1 10 4 5 6 7 9 2 3 8 11
- 10. 10 3. YOUR FIRST CUSTOMERS ARE WORTH 100X THEIR REVENUE IN FUTURE ENTERPRISE VALUE • Over invest in initial customers • People buy from people they like and trust • Get on their side as quickly as possible • Be clear in your expectations of each other Market Entry Domino’s Famous Players Shoppers Drug Mart (~ 6M) Cara Foods (~ 3M)/Petro Can (~ 3M) / HBC (~ 1M) / Esso (~ 2M) etc. McDonald’s Canada McDonald’s US Brinker (~5M) / Pizza Hut (~7M) / Applebee’s (~3M) / Starbucks (~ 6M) Mitchell’s and Butlers Boots PLC (~ 12M) ASDA (~ 2M) / Tesco (~ 1.5M) / Waitrose (~ 2M) / TJX / New Look / etc.
- 11. 11 EMPATHICA STORY ‘02 Founded / Rev.+ – 375k deal with FP ‘03 – CDN Inflection Point booked $3M+ in ARR ‘06 - $7M PE (2M secondary) - US / UK acceleration ‘05 – Chart a New Course - 15% EBITDA - V2 - UK entry - JPN entry 07 – Tidal Wave $11M ARR - 89% Rev Growth, 150% Bookings ‘08 – Go Message = 1.5M Disaster -Launch Campaign - $4M debt 09 – Roller Coaster - 9M Bookings -4M debt covenants breached - $6M debt restructure - 18% decrease in ee’s - Flat Revenue @13M - Go Recommend – has anyone every heard of facebook? 10 – Team Reboot - GR sell in first 12 – Go Recommend -UX Rebuild - Social Intell. - iBank Hired - Senior Ops 11 – Sbux – largest deal in Co. History @ 2.5M - Forrester Argh! 13 – 22M ARR, Acquisition ‘02 Beach Head ~$1M SDM - Angel round $250k 1 10 4 5 6 7 9 2 3 8 11
- 12. 12 4. PROGRESS DOESN’T FEEL GOOD • Put your head up from inside the trenches and get a good look at what’s really happening • Transformative events are painful • Benchmark and be BOLD
- 13. 13 EMPATHICA STORY ‘02 Founded / Rev.+ – 375k deal with FP ‘03 – CDN Inflection Point booked $3M+ in ARR ‘06 - $7M PE (2M secondary) - US / UK acceleration ‘05 – Chart a New Course - 15% EBITDA - V2 - UK entry - JPN entry 07 – Tidal Wave $11M ARR - 89% Rev Growth, 150% Bookings ‘08 – Go Message = 1.5M Disaster -Launch Campaign - $4M debt 09 – Roller Coaster - 9M Bookings -4M debt covenants breached - $6M debt restructure - 18% decrease in ee’s - Flat Revenue @13M - Go Recommend – has anyone every heard of facebook? 10 – Team Reboot - GR sell in first 12 – Go Recommend -UX Rebuild - Social Intell. - iBank Hired - Senior Ops 11 – Sbux – largest deal in Co. History @ 2.5M - Forrester Argh! 13 – 22M ARR, Acquisition ‘02 Beach Head ~$1M SDM - Angel round $250k 1 10 4 5 6 7 9 2 3 8 11
- 14. 14 5. YOU NEED TO BAKE • 3 Cities, 16 meetings, 8 term sheets, 2 deals • If you don’t like each other, don’t get into business together • It’s not over until the wire transfers are completed • Take secondary if you can get it, negotiate the second tranche
- 15. 15 EMPATHICA STORY ‘02 Founded / Rev.+ – 375k deal with FP ‘03 – CDN Inflection Point booked $3M+ in ARR ‘06 - $7M PE (2M secondary) - US / UK acceleration ‘05 – Chart a New Course - 15% EBITDA - V2 - UK entry - JPN entry 07 – Tidal Wave $11M ARR - 89% Rev Growth, 150% Bookings ‘08 – Go Message = 1.5M Disaster -Launch Campaign - $4M debt 09 – Roller Coaster - 9M Bookings -4M debt covenants breached - $6M debt restructure - 18% decrease in ee’s - Flat Revenue @13M - Go Recommend – has anyone every heard of facebook? 10 – Team Reboot - GR sell in first 12 – Go Recommend -UX Rebuild - Social Intell. - iBank Hired - Senior Ops 11 – Sbux – largest deal in Co. History @ 2.5M - Forrester Argh! 13 – 22M ARR, Acquisition ‘02 Beach Head ~$1M SDM - Angel round $250k 1 10 4 5 6 7 9 2 3 8 11
- 16. 16 6A. EDUCATE YOUR BOARD ON RESPONSIBLE GROWTH • No one wants to rebuild • Undeniable link between revenue growth and valuation • Growth = bookings - attrition • Reputation is critical to future success
- 17. 17 6B. VALUATION ALCHEMISTS • Acquirers buy the present value of discounted future earnings • Correlation does not equal causation • Timing is everything • Capitalize on hot streaks Insert alchemist pic
- 18. 18 6C.UNDERSTAND YOUR LIMITS / HAVE TWO PLANS 150% growth in booked sales + 89% growth in recognized revenue + Successful acceleration in two key geographic markets = Failure
- 19. 19 EMPATHICA STORY ‘02 Founded / Rev.+ – 375k deal with FP ‘03 – CDN Inflection Point booked $3M+ in ARR ‘06 - $7M PE (2M secondary) - US / UK acceleration ‘05 – Chart a New Course - 15% EBITDA - V2 - UK entry - JPN entry 07 – Tidal Wave $11M ARR - 89% Rev Growth, 200% Bookings ‘08 – Go Message = 1.5M Disaster -Launch Campaign - $4M debt 09 – Roller Coaster - 9M Bookings -4M debt covenants breached - $6M debt restructure - 18% decrease in ee’s - Flat Revenue @13M - Go Recommend – has anyone every heard of facebook? 10 – Team Reboot - GR sell in first 12 – Go Recommend -UX Rebuild - Social Intell. - iBank Hired - Senior Ops 11 – Sbux – largest deal in Co. History @ 2.5M - Forrester Argh! 13 – 22M ARR, Acquisition ‘02 Beach Head ~$1M SDM - Angel round $250k 1 11 4 5 6 7 9 2 3 8 10 12
- 20. 20 7. NEVER GET TOO FULL OF YOURSELF Innovate, Validate, Build, Validate, Refine, Validate, Scale, Validate
- 21. 21 EMPATHICA STORY ‘02 Founded / Rev.+ – 375k deal with FP ‘03 – CDN Inflection Point booked $3M+ in ARR ‘06 - $7M PE (2M secondary) - US / UK acceleration ‘05 – Chart a New Course - 15% EBITDA - V2 - UK entry - JPN entry 07 – Tidal Wave $11M ARR - 89% Rev Growth, 150% Bookings ‘08 – Go Message = 1.5M Disaster -Launch Campaign - $4M debt 09 – Roller Coaster - 9M Bookings -4M debt covenants breached - $6M debt restructure - 18% decrease in ee’s - Flat Revenue @13M - Go Recommend – has anyone every heard of facebook? 10 – Team Reboot - GR sell in first 12 – Go Recommend -UX Rebuild - Social Intell. - iBank Hired - Senior Ops 11 – Sbux – largest deal in Co. History @ 2.5M - Forrester Argh! 13 – 22M ARR, Acquisition ‘02 Beach Head ~$1M SDM - Angel round $250k 1 11 4 5 6 7 9 2 3 8 10 12
- 22. 22 8. TIMING IS EVERYTHING
- 23. 23 EMPATHICA STORY ‘02 Founded / Rev.+ – 375k deal with FP ‘03 – CDN Inflection Point booked $3M+ in ARR ‘06 - $7M PE (2M secondary) - US / UK acceleration ‘05 – Chart a New Course - 15% EBITDA - V2 - UK entry - JPN entry 07 – Tidal Wave $11M ARR - 89% Rev Growth, 150% Bookings ‘08 – Go Message = 1.5M Disaster -Launch Campaign - $4M debt 09 – Roller Coaster - 9M Bookings -4M debt covenants breached - $6M debt restructure - 18% decrease in ee’s - Flat Revenue @13M - Go Recommend – has anyone every heard of facebook? 10 – Team Reboot - GR sell in first 12 – Go Recommend -UX Rebuild - Social Intell. - iBank Hired - Senior Ops 11 – Sbux – largest deal in Co. History @ 2.5M - Forrester Argh! 13 – 22M ARR, Acquisition ‘02 Beach Head ~$1M SDM - Angel round $250k 1 11 4 5 6 7 9 2 3 8 10 12
- 24. 24 9. MANAGE THE ANALYSTS Think of 1,000,000 consecutive swear words….
- 25. 25 EMPATHICA STORY ‘02 Founded / Rev.+ – 375k deal with FP ‘03 – CDN Inflection Point booked $3M+ in ARR ‘06 - $7M PE (2M secondary) - US / UK acceleration ‘05 – Chart a New Course - 15% EBITDA - V2 - UK entry - JPN entry 07 – Tidal Wave $11M ARR - 89% Rev Growth, 150% Bookings ‘08 – Go Message = 1.5M Disaster -Launch Campaign - $4M debt 09 – Roller Coaster - 9M Bookings -4M debt covenants breached - $6M debt restructure - 18% decrease in ee’s - Flat Revenue @13M - Go Recommend – has anyone every heard of facebook? 10 – Team Reboot - GR sell in first 12 – Go Recommend -UX Rebuild - Social Intell. - iBank Hired - Senior Ops 11 – Sbux – largest deal in Co. History @ 2.5M - Forrester Argh! 13 – 22M ARR, Acquisition ‘02 Beach Head ~$1M SDM - Angel round $250k 1 11 4 5 6 7 9 2 3 8 10 12
- 26. 26 10. IF YOU WANT TO GET A JOB DONE FAST – WORK SLOW • Change from waterfall – agile XP • Completely different talent profile • Rebuilt development team • 4 UX designers • Rebuilt the customer success team
- 27. 27 EMPATHICA STORY ‘02 Founded / Rev.+ – 375k deal with FP ‘03 – CDN Inflection Point booked $3M+ in ARR ‘06 - $7M PE (2M secondary) - US / UK acceleration ‘05 – Chart a New Course - 15% EBITDA - V2 - UK entry - JPN entry 07 – Tidal Wave $11M ARR - 89% Rev Growth, 150% Bookings ‘08 – Go Message = 1.5M Disaster -Launch Campaign - $4M debt 09 – Roller Coaster - 9M Bookings -4M debt covenants breached - $6M debt restructure - 18% decrease in ee’s - Flat Revenue @13M - Go Recommend – has anyone every heard of facebook? 10 – Team Reboot - GR sell in first 12 – Go Recommend -UX Rebuild - Social Intell. - iBank Hired - Senior Ops 11 – Sbux – largest deal in Co. History @ 2.5M - Forrester Argh! 13 – 22M ARR, Acquisition ‘02 Beach Head ~$1M SDM - Angel round $250k 1 11 4 5 6 7 9 2 3 8 10 12
- 28. 28 IF 10 IS TOO MUCH, REMEMBER 3 1. Do it because you love: it, the Team, and the Customers 2. Everything takes twice as long and costs twice as much 3. Move fast, work slow and build with scale in mind
- 29. 29 QUESTIONS?