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CEO Spotlight: Deepak Verma, eCredit
By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search
Angel Mehta: What was eCredit’s original vision?
Deepak Verma: Venkat Srinivasan founded eCredit in 1993. It was really a continuation of his thesis work on the intersection of working capital management and artificial intelligence technology. In its early years, eCredit was an enterprise software company aimed at making the trade credit operations of large corporations more efficient. As you know, no large corporation pays cash when it purchases goods or services. The vendor therefore has to extend credit, and in order to do so properly, has to ask a series of questions… “How should I measure the financial risk I’m exposing myself to? How has the credit quality of my buyer changed? How big a credit line should I establish? How should I establish, implement and monitor credit policy guidelines for my staff worldwide?” eCredit built software solutions for large corporations to answer these questions and manage the associated workflow. Some of our early customers were Apple, Cargill and ChevronTexaco. Around ’95-’96, our customers started asking us to build similar capabilities to assist them with their collections efforts. As a result, we built an enterprise collections solution to help them reduce Days Sales Outstanding (DSO) and cost of collecting. That takes us up to 1999 when I joined.
Angel Mehta: Presumably things looked incredibly positive given what was happening in the world. I’m going to assume there has been a change in ‘vision’ since, but what was the vision at the time?
Deepak Verma: I joined just before we collided with the internet bubble. In my role as head of strategy and business development, my first assignment was to help us figure out how we should play in the burgeoning internet economy. We came up with a model that we called “The Global Financing Network”. Our goal was to establish a network of vendors and financial institutions, in order to create additional financing options for vendors to offer to their customers. We were initially quite successful, enrolling a number of financial institutions with very different credit appetites, as well both “old economy” and “new economy” companies.
Angel Mehta: Sounds like CommerceOne or Ariba for financing…
Deepak Verma: That’s exactly right. In those days, there was a new B2B exchange being born every minute. They all had hockey stick projections of growth. But even in the context of a B2B exchange, someone has to carry the float for 30 days or more. Most of these exchanges didn’t have the balance sheet to fund their projected growth, so they came to us to access the pool of liquidity created by the banks on our network. We signed up numerous companies in a fairly short period of time, and began to look very attractive to the investment community.
Angel Mehta: What was the valuation?
Deepak Verma: It was unbelievable. In less than a year, our valuation grew 20x to over a billion at its peak. We were getting ready to file for an IPO when the Internet Capital Group (ICG) became interested in us and purchased a significant stake. It was a time of chaotic, uncontrolled growth. We grew from 50 to 400 employees in about 18 months. Then the bubble burst. Through the latter half of 2000 and all of 2001, most of our “new economy” customers either went out of business or never attained the growth they expected. By then the banks had also become smarter - they decided they didn’t like the idea of having somebody commoditizing their services and coming between them and their customers.
Angel Mehta: So given that 2 years after you joined the company, the picture had completely changed, did it ever occur to you to leave the company?
Deepak Verma: I certainly thought about it. The downsizing was worse than we had anticipated. Venkat stepped down as CEO in early 2001 and we brought in a seasoned senior executive from GE Capital to succeed him. We went through a series of cost-cutting exercises, and so you have to be prepared for the possibility of losing your job. As it turns out, that did not happen, and in early 2002, our CEO decided to step down. When that happened, the investors asked me to take on the lead role. This was clearly the biggest challenge I had ever been asked to take on, one that I’m really glad today that I did.
Angel Mehta: You say you thought about leaving… was that because the bubble had burst and you knew the possibility of doing a billion dollar IPO had disappeared?
Deepak Verma: No it wasn’t that at all, Angel. The Company still had some very valuable assets – customers, technology, and people. But when you go through multiple cut-backs, and may be a part of the next one, you have to mentally prepare yourself. Its just a reflection on the period we were going through. Maybe that’s why I didn’t seem passionate when my investors first offered me this role.
Angel Mehta: Yet your investors went ahead and still made you CEO despite the fact that you maybe appeared to lack the passion. They must have seen something else to convince them you were the right person. What was it?
Deepak Verma: When they first offered me this job I was very honest and said, “I may not be the best candidate so let’s go find somebody else.” But they knew and I knew that finding the right CEO for the Company in our situation would be tough. I had worked closely with them for a while and they knew me well, so they probably thought I was the right choice, that it was more a matter of getting me fired up then it was of capability. I obviously feel pretty good about the faith they placed in me.
Angel Mehta: I assume you secured certain guarantees from them before you accepted the position?
Deepak Verma: I asked for a 12 month runway for the Company - and they agreed. They also agreed to compensate my management team as founders and to give us some downside protection just in case. By that time, I was as fired up as I’d ever been – we knew we could build this into a great company, into something special.