One hundred people in the Downtown Vancouver Law Courts Restaurant hushed to a silence on a recent evening to hear the CEOs Aaron Rallo of PNI Digital Media and John Livingston of Absolute Software tell how they grew their companies from infancy to global operations. While today both PNI and Absolute are proud winners of Deloitte’s Fast 50 in 2009, the journey has not always been smooth for these tech start-ups. Like every start-up, PNI and Absolute echo the same upward battle against economic challenges and difficulties in their industries. The companies also share common factors that led to their takeoffs and these lessons are relevant to all entrepreneurs who want to better leverage their start-up’s success.
Aaron Rallo, CEO, PNI Digital Media
Setting the tone for his story, Rallo begins by saying, “Starting a company is like walking over broken glass.” While Rallo only joined PNI in 2004, he takes a moment to recount how PNI (then Photo Channel) hit rocket bottom when the dot-com bubble burst. Leading into the dot-com, PNI was operating with a direct business model whereby customers upload their photos to PNI and in turn the start-up would print the digital photos. Like everyone trying to capture the digital dream, PNI was raising money in the $20 million range. When the economy eventually tanked, the bank seized all of PNI’s assets and the company was left with nothing but a few patient investors who believed in the vision.
It was these hopeful investors who helped PNI develop its post-bubble business model, as it supported, not undermined, the retailers. Rather than side stepping the retailer, customers upload their photos to the retailer’s website, then pick up finished prints from the retailer’s store. At that time, Walmart had no online presence but was eager to get involved in digital photography and it became PNI’s first client. “Once you have Walmart as a client,” explained Rallo, “raising money is a little bit easier.”
In was at that point in 2004 that Rallo joined PNI. “If you are going to have any customer,” says Rallo optimistically,” Walmart is the one you want.” Nonetheless, PNI was struggling considerably, with revenues ranging from $300,000 to $400,000 but with costs in the millions. PNI persevered through the difficult times, raising funds and managing to fully service Walmart Canada. PNI successfully sought out Costco Canada while penetrating the U.S. market at the same time, signing a deal with CVS, the pharmacy chain. It was only when PNI signed on Costco.com a year and a half later that the company finally saw positive cash flow. “That was a huge, monumental shift for our company,” recounts Rallo. “Until then we were still struggling. This changed our mindset away from ‘start up’ and made us think ‘Wow, we are successful!’”
While PNI would continue to have its own challenges, it made several acquisitions, raising its status to a global enterprise offering full-service solutions for retailers. Today, PNI boasts a portfolio of customers including Black, Costco and Walmart in Canada, CVS and Costco in the U.S., Kodak in China and Works Media and Pixology in Europe. Rallo admits it doesn’t necessarily get easier as a company ages, rather your worries change. “In the early day you worry about how you are going to make payday. You worry about where you are going to get inexpensive software that works. You worry about what investors will think. Five or six years later you worry about different things. You worry about currency fluctuation because it has a negative impact on your balance sheet. You worry about currency exchange rates because you have revenue coming from the U.S. market.”
The key that has gotten PNI to where it is today, explains Rallo, is that core group of people who are willing to work hard. It is about making them understand that they can grow with the company and that there is a path leading somewhere. Rallo drives home his point about the importance of the team: “When you are walking over broken glass with people, you want to do it with people you can trust because they will get you through that.”
John Livingston, CEO, Absolute Software
“Absolute Software,” Livingston explains, “is a 15-year evolution. It is as exciting for me today as it has been over the course of those 15 years.” Absolute Software began when one man had his laptop stolen and another man, a computer programmer, implanted chips into computers that would allow the unit to be tracked by police if the hardware was stolen.
“The key is starting with a strong value proposition. Keeping track of devices is a strong value proposition,” Livingston asserts. At that time the physical devices were expensive and companies were less concerned about the data and more attracted to the opportunity to control millions of dollars of equipment and track thousands of employees.
“Our biggest customer that made it happen for us was Dell,” Livingston said, echoing Rallo’s Walmart example. Dell was on a rocket ship upward at the same time Absolute was taking off. Absolute’s services helped Dell out of many difficult situations, so once Dell saw that it worked the Dell team introduced Absolute to their corporate customers. Dell’s competitors quickly followed. “Getting that one customer on board is really important,” advises Livingston, “because you can leverage that one customer to get so many more.”
As the leader in asset management and physical recovery, the path upward was not all smooth for Absolute but persistence and the right team was the key. The computer industry, especially in the early stages, was disjointed and there were a lot of compatibility issues. Absolute Software worked closely with Microsoft for several years to ensure that its services would work with the operating system. “Our ability to overcome these challenges in general, and this one specifically, is the test of entrepreneurs as to whether we will be successful or not.” Behind that perseverance needs to be a talented development team that you can trust, Livingston said. “It is amazing how many people come and go. We are lucky to have some 10-year ventures at Absolute. You need people who are going to be there year in and year out.” In order to get that dedicated group of people, you need to incent people. “We at Absolute want our team members to really go and do something, and they will make money from that. There is lots of success to share with everybody.”
Today Absolute has every computer manufacturer on board and continues to be focused on the company’s core competencies: securing and managing end-point devices. Livingston gets visibly excited as he talks about new opportunities for innovation with the advent of cellular modems, iPads, and other communication technologies. “It has been a great 15 years,” concludes Livingston, “Hopefully there is another 15 years left in us.”
PNI Digital Media and Absolute Software both attribute their successes to that initial key customer and a dedicated team of talented individuals. PNI and Absolute had Walmart and Dell respectively to springboard other clients. Additionally, it’s a team effort, not that of a single entrepreneur, that leads to a firm’s success. So attracting, incentivizing and retaining that talent is crucial. That means relinquishing some of the power and delegating, even though no one can do it as well as you. It also means exploring the different aspects of the business and going where you add the most value. The sweat, passion and skill is not always enough to be one of Deloitte’s Fast 50 but Rallo and Livingston shared with us what it took for their companies to get there.
Elysha Ames is an MBA candidate in the 2011 class at the Sauder School of Business at the University of British Columbia, specializing in Marketing and Strategic Management. Born and raised in Vancouver, Elysha has over three years of experience working in communications, business development, and strategic planning. Most recently working for an international non-profit organization, Elysha has lived and worked in Los Angeles, Toronto, New York and Tel Aviv. She is currently the Communications and Writing Assistant for the Real Estate Foundation of BC while she completes her MBA.
Posted by Sue Ansell at June 29, 2010 11:15 AM
Categories: General Technology start-ups