CP24: Clint Oram from SugarCRM Talks about Starting & Running CRM Business
Welcome to the 24th episode of our podcast with Clint Oram from SugarCRM!
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Martin: Hi Guys. Today I have a sugar sweet guest with me. Clint, please introduce yourself, who are you and what do you do?
Clint: Pleasure to be here today, my name is Clint Oram. I am a co-founder of SugarCRM and I run marketing here for the company.
Martin: Great. Tell us a little bit about SugarCRM; what are you actually doing?
Clint: SugarCRM is a customer relationship management company. We compete against Microsoft and Salesforce every day. We are the up-and-comer in the market place, disrupting the way companies and more importantly customer facing business professionals leverage CRM technology to build better relationships with their customers.
Martin: Great. I mean, everybody knows that you need to convince the customers to buy with you so therefore you need some kind or CRM tools for that.
Let’s talk about the beginnings of SugarCRM. So let’s go back like 9 or 10 years, what was it like? How did you feel when you started the company?
Clint: Well, it has been more than 9 or 10 years, it has now been 13 years and going into 14 years, so it has been certainly a very exciting journey and a big part of my life now. As I look back in 2004, in January of 2004, a group of us that were working together at another CRM company well we saw the opportunity to build a different type of CRM company. Our vision all along has been that legacy customer relationship management software solutions have been very focused on helping managers manage their sales people, their customer service people and they haven’t actually been focused on helping customer facing professionals build a relationship with their customers. That is the irony of this CRM industry, it is called customer relationship management, but it is not called work force management. That was the opportunity that we saw, there was a lot of changes in the market place happening around subscription business models, around open source, around software as a service and we grabbed a hold of those business model shifts and turned them into a company that is focused on helping sellers sell and customer service agents deliver extraordinary customer service. That was our vision 13/14 years ago.
Martin: When you moved from being an employee to starting your own company, how did you feel? After day one when you left the other company, how did you feel? Have you been afraid of what could happen? What was the feeling like? Tell us.
Clint: That is an interesting journey in itself because you described it as gong from an employee to being owner, and I would describe the next step in there is to realize that you are an employee again because at the end of the day you always have a boss, and my boss is my customer. I don’t have anywhere near as unilateral freedom to just do whatever I want to do because I have to make my customers successful. I have to make them happy, because if they aren’t happy and successful, they don’t pay me money and I can’t do payroll.
But behind that journey and the thought processes there, I think the hardest part of starting a company was to have the courage to leave a good job. I was doing very well at my previous company, I had a great career path ahead of me, I had a lot of respect from my management team and so I was in a good spot. In fact as I told my family that I was getting ready to do this, I had some family members saying: “That is awesome, that is great, starting your own thing, I am so proud of you.” And I had some family members saying: “You are crazy, why would you leave a great job and have no salary and take all that risk?” So all those factored in there together, but I think probably the single hardest thing about getting Sugar started was finding that courage to go do it.
Martin: Yes. I mean for example when I started the company, I was always thinking about what is the worst thing that could happen to me after like 6/12/24 months in the game. What was your thought process, because I know you had some kind of interesting first 12 months?
Clint: Yes, for us the 3 of us that started the company together, there was John Roberts, Jacob Taylor and myself. And the 3 of us were all peers at a previous CRM company called Epiphany, and we all worked together on a day to day basis, and we are all married and 2 of us had young children. My son was 2 years old, John’s son was 2 years old, Jacob’s wife was pregnant and so there was a lot of family commitments going on. But at the same time, all of our wives were working and so we had from a family perspective, each one of us had a guaranteed income from the perspective of our wives working. We had insurance, we could pay for insurance things like that through our wives. We made an agreement, we said we are giving ourselves one year, no salary expectations and at the end of 12 months, we will sit down and re-evaluate where we are at, but in that first year we are not going to worry about if we are making money or not, we are just going to focus on building an awesome idea and get things going.
But to be honest, to be really frank here, it worked much faster that we every thought. We had a bit of a story book beginning; just kind of take you through 2004 which is the year that I will remember forever, it was in January of 2004, actually January 18, 2004, which is just one week from now, that John and I went out to lunch at a Thai restaurant and he threw out the idea about starting a CRM company and asked me if I was interested in working with it on it with him and I said: “Yes, absolutely.” We started shaping the idea and we knew we needed an architect, I am a developer myself but I am much more front end user experience developer, and we needed a core back end architect. So we went to Jacob who was one of our colleagues, a couple of months later after we had started shaping the idea and we recruited him on board and so it was in March that the 3 of us came together and at the end of March we pitched our idea to a VC, a venture capitalist that we knew to see if she thought it was interesting and she gave us some very positive feedback which we then learnt later all VC’s give you very nice positive feedback, they all say that is a very interesting idea.
Martin: If they don’t invest then it’s not really what they say.
Clint: True, but we took her positive words as complete affirmation that we are aboard and we quit our jobs based upon what she said and we went off and we started the company, and we ended up learning later that she was just saying nice words just because she knew us. That was kind of a funny point as we took that moment of “Hey guys, you have a great idea, I think you should keep working on it” and we took that as a justification back to our wives and our family and said, “Hey, a VC says we have got a great idea, so we are going to do it.”
It was in April 2004 that we started working full time on the idea; we had an alpha version of the product out in the market place in May. In June a different VC found us and became interested in us, and gave us our first 2 million dollars in June of 2004. By August we had 10 employees, by October we had our first customer on board and by the end of the year we had done $250,000 at revenue, and that was from a launch in January where we said hey let’s go do this, to December. At that point we had 20 employees, 2 million dollars in the bank and our first revenue on board. That was an exciting year, no doubt about it.
Martin: Good. If I remember correctly, that you used a specific marketing tactic in order to attract customers. Can you explain this a little bit?
Clint: Absolutely. So open source was a big thing in 2004, and if you were in the market in 2004 doing software, you remember some major market forces happening. This was, we were in the ‘.com’ hangover. So the .com boom in 1997/8/9 generated a huge amount of venture capital investment into the software world. You had companies like pets.com which was awful, or you had Amazon which was a huge success, and Google which was a huge success. But out of that came the .com collapse in 2000 where a lot of these or so many of these good ideas were vaporized. And what you had was well funded start ups with sales people driving around in their BMW’s showing up and selling dreams for 7 figures, for millions of dollars and other companies. There is a lot of frustration in that .com hangover, that 2000-2004 period of enterprise software companies selling air.
The backlash, the response to that was companies wanted to have more confidence that software vendors were committed to their success. Out of that came subscription billing; you have got to earn the customers every year. Out of that came commercial open source which is where we focused, which was the whole idea of try before you buy. Also out of that was the starting of the idea of software as a service, that the vendor in many cases can run the software more efficiently than you can run it yourself.
So these were all the ideas that started with it and we took advantage of all 3, but our focus was open source; it was building an community around us. And the core idea there was though a freemium model and building a community of enthusiastic and committed developers. We could take our ideas to market and gain traction in a completely new and different way. And we were just, well frankly extremely successful at it. We have become the leader in open source CRM.
Our business model has shifted since then, we are not focused on open source the way we were in the past but it was a fantastic way to get us started back in 2004 because the market was looking for an open source CRM leader and we jumped on that opportunity before anybody else did and we out executed our competition.
Martin: So awesome to hear that, Clint.
BUSINESS MODEL OF SUGARCRM
Martin: When I am looking at business models, one thing that I am always very much interested in is what is your sustainable competitive advantage over others? Why should customers use SugarCRM and what dimensions are you trying to be the best at?
Clint: That is an excellent question there. Here is the thing that I have learned over 13 years; technology changes and you need to be taking advantage of the most modern technology all the time. For the first era of SugarCRM, our advantage was open source; we were giving away an incredibly robust piece of enterprise software that has outclassed our competition and we were ahead of the game out there.
But as time moved forward, what we found was companies became less interested in open source, and also just became less interested in how the software was deployed. What I mean by that was the things that were driving companies to look for open source and software as a service stopped becoming the focus of a buying decision.
What we started shifting towards was what do you do with the software, and is it helping my people be more effective? And through that time we had mobile technology really become a focus. We have had social technology, really become a focus. And we have had today, it is predicted analytics, it is machine learning. My point there is technology shifts over time.
And as you reach a point as a start up or as a company, as a whole, where you move past being a start up where you have a unique technology advantage by being a fast mover around a particular piece of technology which we have done multiple times now, and you end up being known in the market place for being an expert in the business problems that you solve. That is where our customers come to us, our customers come to us because we are experts in CRM, all we do is CRM, our entire focus as a company is CRM.
If you look at salesforce.com, they do all kinds of things; they do platform as a service, they do collaboration software, they do social media monitoring, they are doing e-Commerce, they are doing all kinds of things above and beyond customer relationship management. Microsoft of course does, they do a lot of things. In fact right now Microsoft is trying to buy CRM leadership by giving away their software for free. And it is interesting to watch that play out because that is working or some companies, but other companies don’t want that approach. And really what we are seeing there is companies that don’t consider CRM to be their competitive advantage, in other words they are not thinking about their customer experience as a unique competitive advantage and they are just buying CRM technology as a commodity, they are shifting over to Microsoft right now, and frankly in the market place that is putting some pressure on both Sales Force and SugarCRM.
But those companies that look to the way they interact with their customers, their customer experience as a unique differentiator for them, they are investing more than ever with us. So we are riding through this shift in the market place right now by focusing on delivering CRM expertise, and that is what we do best. That is our competitive advantage. And that comes both from a technology perspective, but also from the expertise within the company, the people that work at SugarCRM, their CRM experts and our customers come to us for that expertise.
Martin: So if Microsoft is basically pitching on a cost dimension through the customers: “Hey guys, we are free, buy us, get us.” Now the question to you would be how do you pitch value to your customers so that they select value over cost?
Clint: The interesting thing in there, of course, is I know that story well. Martin, I know that free story well; I gave away my software for the first 10 years of the company, I gave away a version of my software for free. What I learned within my own business is that when it comes to strategic software, software that is incredibly important to how you grow as a company, companies value what they pay for, and if they are paying nothing for it then they don’t value it and they don’t see it as a strategic piece of their business. That is what we saw and why we ultimately started moving away from the freemium model and we started putting all of our attention on a commercial model is because the companies that really valued our software the most, they wanted to pay for it, they wanted to feel like they were a customer as opposed to somebody who had just downloaded free software. So I firmly believe Microsoft is going to learn that all they are doing is collecting the cheapest customers who don’t want to pay anything anyways and I wish them good luck.
We are focusing on customers, companies that really value the quality of their customer experience. There is a partnership between us, there is a give and a get that goes both directions that makes it a valuable partnership for us on both cases. I am very comfortable with where we are going to land in the future; we are going to be a stronger and more valuable company as a result of what Microsoft is doing in the market place today.
ADVICE TO OTHER ENTREPRENEURS FROM CLINT ORAM
Martin: Great. Clint, over the last 13/14 years, what have been your major top 2 or 3 learnings that you could share with other first time entrepreneurs?
Clint: Yes, that is a great question there. I come from a family of entrepreneurs on one side, so in my dad’s family, every generation going back, grandfather, great grandfather, great great grandfather, they were all entrepreneurs, building their own businesses. In fact my dad built a software business in the early 80’s that was somewhat similar nature to what I am doing here at Sugar, about connecting people together and helping them collaborate and work together more effectively, it was focused in a different industry, focused on the media industry, and I learned a lot watching my dad build his company in Sacramento California where I grew up back in the 1980’s when I was a teenager. This was when technology was really hitting stride; there was the TRS 80, there was the personal computer. When I was a 10 year old kid, the very first video games were coming out, and I was in the video game parlor playing Pacman and all that, so it was a fun exciting time. It was the beginning of the technology industry the way we know it today.
I had the opportunity to watch my dad build that company, and there are some things I watched him do well and some things that I think he made some mistakes on. One of those was he had a hard time delegating decision making, he had a hard time releasing power, if you will, to the people around him, and he put himself in the centre of all the decision making, and the company just couldn’t scale. This company couldn’t scale because he had to be the centre of all decision making. For me, when I started Sugar, I took that lesson to heart and I think one of the things I have done really well here at SugarCRM is to hire people that are smarter than me and give them the authority to run their parts of the business and collaborate with them, but stand back and give them authority and accountability. That is something that I think many entrepreneurs have a hard time appreciating that, understanding that. Because they have got a vision and they want to execute on that vision and it is easier to execute on the vision in the short term if you just do it yourself, but in the long term, if people don’t know what you want them to do when you leave the room, if they don’t feel like they can get things done when you leave the room then you can never leave the room. That is how to build a company, so that is one lesson learned.
Another lesson learned I thing I think in there, I watch a lot of young entrepreneurs, early entrepreneurs spend almost too much time trying to be clever in making business decisions and being afraid, you make the decision in some key area of, for instance, financing or customer contract, you know, in business relationships as a whole and I watch entrepreneurs be too clever for their own good and they assume that the person on the other side of the table is being a Machiavelli, right. What I find is if you build a relationship of trust, if you have confidence in your ability to deal with any unforeseen negative circumstances in the future, if you have confidence in yourself, if you have trust in the people that you do business with, you end up shaping your own reality, you get what you create. If you believe that everybody else is going to take advantage of you, then they probably will take advantage of you. If you believe that your business partners, your vendors, your suppliers, your customers, your investors, if you believe that they will be focused on success, then they will be focused on success. So I think that is a very important lesson for every entrepreneur to think about.
The third lesson that I would talk about is how to actually execute strategic planning. I put a lot of effort into the actual mechanics of strategic planning and how to build a business plan and share a business plan with your investors and your customers and your employees. That is an area that I think a lot of entrepreneurs don’t know where to get started with and they have got a very clear idea in their head, but being able to write that idea down in a way that translates into strategy, culture and tactics within the company is an area that I know a lot of entrepreneurs have challenges with.
Those are my thoughts in there; hire people smarter than you, be willing to trust the people around you and put time in writing down your thoughts so that your strategies, so that people know what to do when you are not in the room.
Martin: I mean, the last point of having an actionable plan on executing your strategy so that you are reaching your vision is, from my point of view, very closely related to delegating power, because if your vision is only in your head, nobody knows what he should be striving for and what he should be executing basically.
Clint: That is exactly the case. When I started the company back in, our first business partner that we recruited was Josh Stein from DFJ Venture Capital, he was the venture capitalist that invested in SugarCRM. We learned a lot from him over the past decade plus he has become a good friend, he has become a mentor, we have learned I think a lot from each other. He said something that was very insightful to me once, he said, “the job of a CEO is to have a vision, to hire great people and to find the money to grow”, that is what you do as a CEO. That is what you do as a leader, you have the vision, you hire great people and you get the resources to give to those people. That is what I think any CEO; any entrepreneur needs to be thinking about.
What you end up finding is a lot of entrepreneurs, they want to do the job, they want to do everybody’s job, having fun building the company and they want to make all the decisions and they are almost uncomfortable hiring other people because that person may not have the same vision that you have and you end up hiring B players instead of A players and then you don’t take the time to write your ideas down and you end up spending your energy doing other things, you should spend your energy doing what the company has been built to do as opposed to focusing on having that vision, articulating that vision, hiring great people and finding capital to grow the company, and that is what an entrepreneur really needs to be thinking about at the end of the day, those 3 things.
Martin: Great stuff. Clint, thank you so much for your insights and sharing your knowledge!
Clint: My pleasure, it was great talking to you today.
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