Jeffery: Welcome to the supporters fund Ask an Angel. I’m your host Jeffery Potvin and today we’d like to welcome Greg Smith. Greg, how are you today?
Greg: doing great Jeff. Thanks for having me.
Jeffery: awesome and Gregory or Greg? Which one do you prefer?
Greg: Greg, it’s fine.
Jeffery: love it Greg. Where are you calling from?
Greg: I’m in Atlanta today. It’s always hot here and today is no exception.
Jeffery: Well, Toronto’s still not kind of falling right behind you. It’s nice and hot here too. I think it’s 30 and muggy and rainy. and tomorrow it’s going to rain for four days so we’re taking all the rain from everybody. Okay, well pretty excited to dive into what you’re doing because you’ve been working on a lot of great things over the years and especially from the time you sold your company all the way through and i kind of want to dive back into that and if you could share a little bit about your background kind of where you’ve come from where you are today and then one thing about you that nobody would know.
Greg: my undergrad study was mechanical engineering. and then i thought it would be a good idea to get a master’s degree in international business. and because I liked beer, and I thought of becoming a mechanical engineer, why not learn german? so i ended up learning german and studying over in germany as well as here in the states. After finishing my masters, I got married. I moved to Atlanta for a couple of years, working for a company here in industrial products. so, I was on the sales and marketing side of that. We did an acquisition in Germany. I went over and helped for a couple years to integrate that company. I got into sales for a couple years then went back to Germany. I came back to the states. and anyone who has been to a foreign subsidiary and then they come back into corporate, it’s a readjustment coming back into the big corporate umbrella. and I didn’t really do so well. So, after a few years, I decided I wanted to get out of industrial product sales and marketing and get into the software business. so, in the year 1998, I left and I went to work for a restart software company in Atlanta. restart meaning they’ve already been through their series a and they had to raise more money not because they were growing fast, but because it didn’t work first. I like to think about experience as what you get when you don’t get what you want. and that’s what I got in those two and a half years at my first software startup. I learned a lot about what didn’t work in a startup environment but that certainly helped me later. I started our company “Invictus” here basically in the basement of my home I still live in. In November of 2000, it was a software as a service platform for the us mortgage industry. We essentially helped mortgage banks connect all the parties to a transaction together over the web and to share documents securely over the web as opposed to 20 years ago via paper. so that business did very well and in 2007, Xerox heard about us and they wanted to own it. and so, we went through a dance and ultimately our business was acquired by xerox in October of 2007. and then ever since then, it’s just been working with early stage companies and working your way through and helping them grow their business. I stayed with Xerox for about three and a half years. As you probably remember and certainly some of your viewers will remember, that was a challenging time in the mortgage industry. as it turns out, we didn’t know that at that time. So, the company that I thought I sold them to was not the company that they ended up buying. So, I stayed to fix it. After three and a half years, it was time for me to move on. and so, I left literally 10 years ago last month and became a full-time angel investor. At that point, I had done a couple of deals while I was still there. but I basically went full time at that point.
Jeffery: Well, congratulations on the 10 years. That’s amazing. it’s a very exciting ride. I want to dive back into a bit of the learning that you mentioned, where you learned a lot about what didn’t work. I like that line, which was kind of your first kick at the can to figure out, this is what I want to build, didn’t work so. you kind of moved on and then you ended up getting into a position where you did find something that was changing the way an environment worked. you built out in that. In the insurance space, can you give a few tips of what you learned that didn’t work that could probably help others to pay attention to when they’re building their companies?
Greg: yeah, so one thing that comes to mind Jeff is the company that I worked for in the late 90s, the CEO believed that we could launch multiple verticals at the same time, maybe one in healthcare, one in mortgage, one in real estate et cetera. and what I what we learned the hard way, it’s that that’s just a good way to go through the cache three times as fast. and then you end up with no vertical fully developed before you’re out of money again. and so, it’s tempting for entrepreneurs. I think sometimes to hedge their bets or want to hedge their bets; this technology could work here and it could work there. So, let me try a little bit. but at some point, in my opinion, you have to burn the boats. you have to commit to one and put all your chips on that table. and hopefully if you get it over the edge, where that becomes cash flow positive, you can use some of that cash to maybe start another one later. but if you try to hedge your bets too long, you end up killing the goose if you will. I remember it was Staples and they had that fast go button or something. I want to punch that button right now and have this whole screen light.
Jeffery: I think so many companies tend to get carried away with the excitement level of having discussions with many different companies and verticals that some of it is, as you mentioned, it’s testing. but a lot of it is going to play it on the ego side, which is they’re just drawn into these deep conversations and they’re tackling everybody thinking that this is going to close this, is going to close this one’s huge, this one does this and they forget that they don’t have a focus vertical and the fastest way to close is to have focus on that one vertical and allow yourself because herd mentality would say that if you line up enough people in the same industry, same space, they’ll all want to be part of that growth or that opportunity because you’re solving that one problem. and if you do forget that you’re one step closer to basically the death of the business, again, in the early stages especially before you take other people’s money, maybe there’s a time to experiment and to go kick the cans and so forth. but at some point, you have to commit to one and then pick the lock on that vertical. and it is like picking a lock. it’s not just sitting there for the taking especially if you’re first generation technology play in a space. you are teaching the market as well as learning from the market at the same time. and while you can, that’s the way to become the number one player in a space. It also takes longer and normally takes more money big time and I think one of the things that your kind of just alluded to as well is that when you start to make ground in that area that you’re focused on, that vertical and you start to get to making dollars, converting clients. that there is a point where you can start to make that differentiator and say, what now? we can start to go into another market. We’ve made some dollars. we’ve got some profit, why don’t we allocate 10,20 and try something out here to see where that’s going to take us, how much time and effort does the team need to shift in order to be able to focus on this new market? so as you took a lot of this insight as you were going through it the wrong way, I guess the first time, but getting some good insights and learning, when did you decide that that was a good time to shift? and we see this with product companies where they go to market with 12 products and they think that this is what the market needs and really they need one product that everybody really likes and then you can start after a year or two after you have some really strong market penetration to start to offer something new because you’ve got a really good structure. you’ve got a lot of commercialization, a lot of product stability. Is there a timing that you would say, you mentioned, profitability is when you know the trigger’s there? or is there well I think its past profitability because it’s really when that vertical starts to become or move towards a cash cow position where you are afforded enough bandwidth?
Greg: it’s not just about the money, it’s also about the mind share of your organization because as you split off a second vertical, the company essentially splits. and so, if you don’t do that right, you can end up in no man’s land again and so you can go raise more money to do that. That’s one way to do it. that’s often done sometimes. I think that certain startups can raise so much money that affords them a lot of bad decisions for a while and some of the better deals that I have been a part of. These are not going to compete in Silicon Valley deals. These are not going to be unicorn companies but solid companies that can get to tens of millions of dollars in revenue and can be a nice tuck-in acquisition for a bigger player. I just think that you make smarter decisions when you really know every dollar in your bank account and where you have to allocate it. it forces you to make smarter decisions and, in many ways