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The 80/20 rule applies to much in business. Does 80 percent of your sales come from 20 percent of your sales force?

Yes. Absolutely.

Maybe. It is definitely disproportionate.

No. We have a fairly balanced sales team.

No idea. Good question!

CEO Spotlight: Jim Howard, CrownPeak  

By Angel Mehta, Managing Director, Sterling-Hoffman Executive Search

His is a story of how true determination can help you achieve what you want. From building a company with zero financing to making a success of SaaS before it was popular, Jim Howard has faced and triumphed over many challenges. Howard, CEO and co-founder of CrownPeak, talks to Angel Mehta, Managing Director of Sterling-Hoffman, on the challenges he faces in making his company successful, why delaying financing can be a good thing, and how to make VC financing work for you.

Angel Mehta (AM): You spent almost 5 years building the company with zero financing, which I find amazing. Tell me how you managed to get a company off the ground organically?
Jim Howard (JH): A couple of different ways. First, my partners and I didn’t pay ourselves for the first two years. We wrote checks into the business ourselves, so we basically acted as our own angels. And then, as we were developing the product, we took professional services work to generate immediate cash flow. We sold to our first few customers in the first few months of starting the company, and that was a great help in financing product development. Selling early was the real key: lf you can’t sell, you don’t have a business.

AM: Those first two keys seem like a pretty big sacrifice – to go with no salary for 2 years! You must have believed pretty strongly in the vision for the product to make that kind of personal investment.
JH: Well, web content management is something everybody who has a web site needs to solve. We knew that. And the alternatives in the market place were very poor. The other products were expensive, difficult to implement, difficult to manage and had crummy user interfaces. And even when they were launched it was, and still is, difficult for organizations to manage and evolve the content management system over time. If felt to us like the market was crying out for a well-managed, well-designed product, available economically, and married to a service to work with the business managers over time. We saw the ‘software as a service’ model before it got hot.

However, like most entrepreneurs, we were probably over-confident in the early days.

AM: Was there any question in your mind that your vision for what the market would turn into when you were getting the company off the ground would not be validated? Was there a risk there or was it a no-brainer?
JH: Early on, it seemed like a no-brainer. We sold three customers in the first few months. However, we founded the company in 2001, and when 9/11 hit, we went almost a year without selling another customer. Eighteen months into the company’s history, we had to make a second personal cash investment into the company. That was a hard call to make, but we’re super glad we decided to give it another six months and see if we could get back on track. At the end of six months we had sold another half dozen customers and knew we had a business. At the end of the third year, we still only had a million-dollar business, but at that point everyone was getting paid, we were a break-even business, and we could see the market starting to turn in our direction.

AM: What are some of the other unexpected challenges you faced trying to get the company from its early stage embryo to where it is now?
JH: We were pioneers in the market, and in retrospect, were out there before the market was really ready for us. So the length of time it took us to gain momentum was very surprising to us. We thought we would be able to gain size much more quickly than we were able. It took us about six years before we were really of any size. We also had a partner who left the business on difficult terms, which was quite distracting for a time. We’ve had to make major changes to the way we pitch the product over the years – getting the marketing message right isn’t a one-time thing. We’ve had to re-design our pitch every two years, which we didn’t really understand when we started.

AM: So would you always recommend to other entrepreneurs that they delay financing for as long as they can?
JH: Generally, yes. There are some businesses that absolutely require capital to start. However, my advice is to delay or avoid investment money unless you absolutely need it, or really have your business cooking and can add fuel for very high growth. Operating with very little capital in the early days makes the business efficient and teaches the management team to be focused on cash. It seems to us that many businesses who get funding in the early days try to do too many things at once. When you don’t have any cash, you prioritize ruthlessly. Also, raising money is very time consuming. Imagine how much benefit the business could have in the early days from the executives spending their time selling deals, rather than pitching to venture capital firms! And, even the best venture capitalists come with requirements that take time from the management team once the funding is closed. Of course, the cash and the business guidance offset those time drains when the match is good between the company and the venture partners.

If a company can wait until it has a real business before seeking funding, I think they will be better-off every time. Raising money will be easier, you will get a different type of venture firm (not a super-early stage fund), and you will get a better valuation.

AM: Was it easier to get meetings with venture capital firms because you had a more established business? And how did your day-to-day experience change after adding outside investors to the mix?
JH: I think our size and maturity level was helpful in getting venture meetings. So was our focus on SaaS, which has been a hot topic in the VC world. Connections and introductions into the venture firms were also very helpful, of course. Even then, we had a long and challenging process to raise money. We wound up with 28 pitch meetings and 21 follow up meetings. From those, we had in-depth discussions with 7 firms. Because we had multiple offers, we were able to select the investors we liked best.

Thinking about it, I pretty much screwed-up my first five venture pitches. It was a good thing we had a lot of exposure, because the first meetings taught us what not to do going forward, what not to say, and what people care about. I became much better at the pitch with practice.

Our day-to-day experience changed more due to growth of the business than from the outside investors. However, the investors have had a major impact, independent from their capital. We are much more accountable to goals, we have many more resources and connections at our fingertips, and we have very good business advisors. We feel lucky there. Not all venture capitalists are good business managers or have operating experience to draw from. They all appear to have strong opinions, though. Finding venture partners who work well with the company – that’s the real key.

AM: What are those things that an entrepreneur should never say to a VC firm?
JH: Well, it’s a bit of a copout, but the wrong thing to say seems to vary according to the type of venture firm and even the specific partner. Some venture firms are really looking for something different than what you are, so pretty much anything you say about your business is the wrong thing. Ironically, venture capitalists are very risk-averse. They will look for a reason not to do a deal, so anything they latch onto that seems like a problem could scare them away. Generally, the issues with the business – and every business has them – should be addressed upfront, and if possible, painted as a strength, or as something your team has solved in the past. Practice your responses to the big issues so that your answer is smooth, but always be honest. They will eventually find out if you aren’t honest. If they find out after funding, you won’t have a good relationship with your board and probably won’t be working there for long. If they find out before funding, it breaks your credibility permanently.

Often the wrong answer is answering a question posed by a venture partner, as asked. Don’t be afraid when a venture capitalist asks you the wrong question to respond that they are asking the wrong question. Give them the right question to ask and then answer that question, because nobody knows your business like you do. Don’t assume they get what you do because they act like they do. Assume you need to explain, or start an explanation, and ask if they want more detail.

You have to be able to think on your feet under pressure, and provide structured, logical arguments that support how your business works and why you’re the right people to lead the company.

AM: What are the key challenges that the business has right now? What keeps you up at night?
JH: There’s nothing that keeps me up at night with this business. We’re a recurring revenue subscription based software business. So we have great visibility into cash flow and can only grow, as long as we retain customers - which we do. Every new customer means growth. So because of the predictability and stability of this model, I spend my time worrying about how to sell more customers, and how to improve our product and service for our existing customers – the fun stuff. This is the most fun I’ve had at a job.

AM: You talk a lot about investing in sales and marketing and selling being the key. Given the choice between additional sales resources and additional marketing resources, which would you pick? Which have you found to be more important?
JH: You can’t separate the two. There’s a balance between sales and marketing, where the number of leads coming in has to enable the sales team to hit their quota and be excited about coming to work. However, a sales person will never tell you they have enough leads or that you can reduce their territory! You have to be ready to bring on new sales folks on a regular basis, but match that growth with lead flow from marketing. Over the years, we’ve tinkered with this formula constantly, and we’ll never stop. Suddenly, there aren’t enough good leads and then we don’t have enough sales folks and then we need to bring in somebody to parse and qualify the leads, and so on… The CEO has to make sure the marketing and the sales groups communicate and brainstorm as a frequent exercise. It’s so easy for them to become disconnected. That’s been a key element of our success, that our marketing efforts have been very practical and sales-focused.

AM: If you had a piece of advice to any entrepreneur starting a company today, something they should keep in mind, what would it be?
JH: Sell early, sell all the time and be personally involved in sales. The CEO is the best sales person, and his/her partners will be the next best for a long time. You need to start selling before you start the business. I hate to see folks spending a lot of time on a business plan. The best research you can possibly do is go out there and sell a deal. Go out there and ask what they’re looking for and sell it to them. The customers teach you how to build your company and then they pay you to build it. So, the quicker you can get out there selling, the better off you’re going to be.

Jim Howard is CEO of CrownPeak and is focused on advancing CrownPeak's leadership in the software-as-a-service market. Under Jim’s leadership since it’s founding in 2001, CrownPeak has become the market leading company in on-demand web site management software. Jim was named by CMSWatch as one of the 20 People to Watch in Content Management. His professional background combines extensive startup experience with years of software development and professional services delivery and management. Jim has spent the past eleven years working with web content management and search technologies. Jim previously held senior executive positions in professional services management, sales and operational management with companies such as USWeb, MarchFIRST and successful startup, W3-design. For interview feedback, contact Jim at jim.howard@crownpeak.com 

Angel Mehta is Managing Director of Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing and CEO searches for enterprise software companies and lead investor in www.softwaresalesjobs.com, the #1 site for software sales jobs. Angel can be reached for feedback at

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