Product growth: Impact of acquisition [004.2]

Since the startup was chugging along for a almost 9+ years without acquiring a second Carrier customer and solely by growing business with a single Carrier customer, it was time for founders to exit the business. The company was sold to a small sized public company, whose primary and only product was connection manager and 80% of their revenues came from a single Tier 1 Carrier customer.

acquisitionThey bought the startup for our Sync product line, which had great potential but no customers. But startup had revenues, which was attractive. So the deal went through. For a period of 3 months, it was very hard to get attention of the new company executives and share our product potential. I got my chance during Mobile World Congress, when during a meeting with the largest cable operator their Director mentioned that they had worked with the acquired startup earlier and they liked what they saw. The individual discussed in detail their requirement with me on the exhibition floor and we setup serious next steps. Suddenly, the new company executives found a new product line that they were not aware of which had come part of the acquisition deal AND they had found a champion in me who was willing to run with the product.

By this time, my team in Mountain View had already made progress in coming close to having a launchable voicemail to text service. So I was invited to our company headquarters to present the roadmap and forecast to the executive team for my product. I presented forecast which showed revenue growth of $100M in 3-5 years. Their reaction was we have never done all this server stuff in SaaS model and it is too risky and cost heavy. I explained that this is what we have been doing at the startup for 9+ years in our Mountain View, CA office. The executives were super skeptical because they did not have anyone in their company who had done server stuff and they had no faith in the startup team.

I had already convinced our Tier 1 customer for rolling out voicemail to text premium service, it was only matter of contract negotiation and agreeing on business model. But my executive team did not want to even send the proposal to our customer. This was a unique situation I had encountered, where the customer was ready but we were not. So I had to spend 2 months time with my executive team in faith building:

  1. Educated in detail about the product history including deployment.
  2. Shared information about other target customers who were interested in buying the product. Luckily the meeting at Mobile World Congress with largest cable operator helped a lot as that contract work was moving forward fast.
  3. Introduced all our 3rd party voicemail to text vendors to our executive team to build trust.
  4. Introduced the key customer stakeholders to build trust and submit proposal.
  5. Kept positioning and re-positioning my product by showing the money at all times by validating numbers from the respective sales persons for each potential target account.
  6. Kept fighting for my product with everyone in the company including CEO to get the right resources and buy-ins.

Finally, I managed to get enough people on my side to get the deal to go through with our customer… phew! A revolutionary new revenue share deal… high risk high reward!

But I still failed to get buy-in for the big vision, even though I provided all data points and relationships. Here are the list of my failures:

  1. Vision of $100M yearly revenue in 3-5 years. It was reduced to $20M per year and before I left we were on target to hit $22M that year.
  2. To acquire one of the voicemail to text vendors so we could compete directly with Nuance and I had lined up that deal too.
  3. To acquire one of the voicemail system vendors again deal was lined up.

It was frustrating in the beginning but I realized over time the perspective of the management team. Lack of knowledge, faith, trust, and process leads to stunted growth in companies, which is what happened.

I traveled more than 100,000 miles that year trying to sell my product to Carriers worldwide. We could have easily closed at least 4 Carrier deals in that year BUT we failed to close any even though we were the top contenders in most cases. Here are the reasons why:

  1. The new engineering head was not willing to commit to product delivery dates for customer contracts… again due to lack of knowledge, faith, trust and process.
  2. Our legal team was too picky and they managed to literally piss off legal teams of large Carrier customers who rejected our bid.
  3. Lack of willingness to partner with larger voicemail vendors to land Carrier accounts.

It was a great learning experience for me to see how acquisitions are mishandled by companies. But I did not give up and pushed my product forward with full force with the one customer we had acquired and grew the product anyway. Ultimately, my product saved the company. They had lost their largest customer and the revenues plummeted to almost one third BUT my product revenue kept growing.

Next up… launch of voicemail to text premium service in revenue share business model.

Previous blog in product growth series: Product growth: Scaling the SaaS platform [004.1]

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