Wednesday, June 23, 2010
Interview with Jan Newman, SageCreek Partners
Anyone in the technology industry in Utah is familiar with Altiris, which ranks as one of the most successful technology firms in the area, having both reached an IPO and was eventually sold to Symantec in 2007 for nearly a billion dollars. The team behind Altiris is now at SageCreek Partners, which has been putting its weight and experience behind a number of companies--both locally and across the U.S.--looking to replicate their success. We spoke with Jan Newman, a partner at the firm, about what SageCreek is hoping to accomplish. Jan's been in the Utah technology industry for awhile, having been a Executive Vice President at Novell, and founder of KeyLabs, another of the area's successes.
Jan, thanks for the time today. First off, for the folks who aren't familiar with SageCreek Partners, can you talk about the background of the firm?
Jan Newman: Our background, is we've had multiple successes in the software business across the five partners we have. One of the thoughts we had in creating this business, was that we've found in Utah that there are lots of great technologies being built, and usually, those entrepreneurs are technology based--they are guys who bring technology to market, get relatively good success, and then go--what do we do now?
They're asking--we did a million dollars in revenue this year, how do we get to 5, 15, 35, or 40 million in revenues? What we're finding, is that most of the time, the entrepreneurs have bootstrapped those businesses don't have the expertise or background to get them to the next level. SageCreek is engaged with these companies, and what we're really finding is a real lack of understanding in how to partner with larger firms, how to define routes to market, and how to find the right people to monetize the technology that they have. That's what I would go away with is we provide is the know how to increase shareholder value at those companies, which is the whole goal at SageCreek.
You've got a pretty impressive team, it seems like must have the entire Altiris executive team there now?
Jan Newman: My background, is I started at Novell, and spent ten years there. I worked at the executive level for lots of years under the tutelage of Ray Noorda. When Ray retired, and went outside of Novell, I founded KeyLabs, which we sold to Exodus Communications for about $50M in 1999. We took some of the technology from KeyLabs, and spun that out and created Altiris, and I was the President and CEO of the company for two years, before I brought Greg Butterfield in. It's the perfect example of really great technology guys, who had built a platform for systems management. We brought Greg in, along with other guys he'd been working with for sales and marketing, and ramped it from $7 million in revenues to $350M in revenues in the Altiris business. Greg's background was in Wordperfect sales, and had been involved in a couple of smaller companies, including Vinca, which he sold to Legato. He was able to pull in a lot of people with sales and marketing background, who could help monetize what we were doing at Altiris. Dwain Kinghorn, Greg's CTO at Altiris, had started at Microsoft, and eventually started his own company, which was acquired by Altiris, and at the time was about the same size, at about $7M in revenues. He brought a great technology background and platform into the company. Steve Erickson was CFO at Altirius, which was his first foray into the technology space. Mark Bonham worked with Wilson Sonsini in the Bay Area for twenty years, and opened up a practice in the Salt Lake area, and had had experience with hundreds of deals, fundraising, and public offerings, which is a good background for people who are looking at raising money , need to understand the market, and how to structure those deals.
How did the team decide to go into consulting, rather than applying your team to a new startup?
Jan Newman: I think that when you look at it, the effort to create a new company is pretty substantial. A lot of companies wanted us to get involved in those engagements, and we found we have the ability to impact lots of other companies by going this route, rather than doing another startup, or even if we were going to take a C-level position at a company that was already going and move it forward. We found we could do a similar thing, and be a virtual, C-level participant in multiple companies, and really drive value across ten to fifteen companies, versus just one. We felt that if we could spend our expertise across a span of technology companies, we could help those companies be a lot more successful.
What was it that made Altiris so successful -- and do you think that's something other startups in Utah can replicate?
Jan Newman: Yes, I certainly think so. Part of this is the company being in the right place at the right time, with the right technology. But, with Altiris, we went into a very crowded space, systems management, but what we were able to do is leverage that technology through lots of routes to market. First of all, was our relationship with Compaq computer, which was later bought by HP, by getting our software on their hardware platform, and having Dell do that later on, and later on with IBM through Lenovo, and getting the system integrators interested in using this as a management platform. The concept is, how do you leverage a lot of other, large companies to be your route to market? How do you get someone to take your technology, and drive it into their space? When we got into Compaq, HP, and Dell, suddenly you have 5,000 sales reps. Finding a way to leverage your support in the marketplace as you go from having 20 sales guys to 5,000 is a challenge for small companies, but it's a great challenge to have. We actually held off Dell for a year, because we wanted to make sure we could executive effectively. We knew we had to executive with HP, and then brought on Dell when we knew how to execute. Those two partnerships became a significant drive in the space, it got our name out there, and then everyone wanted to sell Altiris. That created challenges of its own, but it was a significant driver. Most companies don't have good routes to market, and really need to work on partnering and expanding their routes to market. That's what we offer companies that come into our organization.
Was there a point at Altiris, when you know that things would work out real well?
Jan Newman: When we brought in Greg Butterfield, we were doing $3 million a year. When we brought on Dwain, we went to $7M, and because of the great technology we brought in, the next year we doubled again. That's when I knew this thing was going to go. We were able to do a public offering in 2002, right after 9/11, and we were one of the first software firms to come out after the bubble and 9/11. It was a challenging environment, but people noticed what we had going, we had HP and Dell starting to execute seriously, and I knew we had the tiger by the tail--it was just a matter of executing in a consistent way, quarter over quarter. After 30 quarters, I think we only missed it once that whole time.
We often hear the argument that it doesn't make sense to build a technology company here, that you ought to build your companies in Silicon Valley because of the talent base there. Yet, Altiris was able to build a big, technology rich organization and do very well. How did you manage that?
Jan Newman: There's a huge technology base in Utah, on the Wasatch Front from Provo through Salt Lake. There's a ton of engineers. There's BYU, Utah State, the University of Utah, and that's a great group you can draw from. However, on top of that, we had a worldwide development organization that Dwain managed, where we had developers in India, Estonia, Australia, plus lots of places around the U.S. The infrastructure out there today really allows you to have a distributed development arm. Although you need a core group of engineers and designers at your headquarters, what you really need is the ability to manage things outside of that core environment, which was one of the things we were really effective at. We figured out the model, which was a great strength at Altiris. All of our developers were not in Utah, even though that is where our headquarters were. One of the things that Greg did, which had a huge impact on the company, is he knew we were not going to do this on our own, and we'd need the right partners, and people in Silicon Valley. So, we had the top tier attorneys, Wilson Sonsini, investment bank in CS First Boston, Deutsch Bank, and several others--a whole supporting cast which helped us through the whole thing. We felt that if we could get lots of strong partners to work with us, we would be just fine.
What do you think you've learned over the years on how to make a company successful?
Jan Newman: The one things that is really key is the team. As I learned from Ray Noorda, when you go out and look at an investment, and how you determine what to invest in, the technology is important, but the most important thing is the team. The technology will get swapped out three or four times, but you need guys who know how to execute, because the market will change out from under them, and things will happen two years from now they didn't expect. A savvy team can deal with those kinds of changes. A case in point, is we had been working with HP for several years, then they went and bought one of our competitors. Our stock immediately went down 30 percent. How do you manage that? You dive in, figure out the nuances, and investigate how to get through that significant change. The key thing, is we have the ability to understand how to spot great management teams, who have engaged a pretty significant market. The other thing, is overfunded companies never go out of business. Finding companies who can generate cash through their business, and who can raise funds oer a period of time--those guys are going to win. One of the things different for us, is we don't have a fund, which is for a reason. We decided that if we were going to go out and consult with companies, and be mentors, we needed to separate that from funding. We have lots of contacts to introduce them to funding sources, but we wanted that to be separate so that we could really give them honest feedback, and didn't want anything to change the direction and advice we gave our clients.
Finally, where's the sweet spot for companies you work with?
Jan Newman: The sweet spot is a company that is generating somewhere between $1M and $6M in revenues. What we've found is someone just coming out of the ground can't afford us, though we'll pick a few with great potential and see if we can help. But, if we've found someone that has proven they can get traction with customers, we think we can add fuel to the fire, by helping them expand routes to market, and develop partnerships. In that range, we think we have the opportunity to really increase shareholder value with those kinds of companies.
Thanks for sharing your insights!