BOZEMAN, MT — Don’t know Greg Gianforte? You should. Gianforte, a former Bell Labs engineer, started several technology companies on the East Coast before lighting out for the mountains of Southwest Montana to found Right Now Technologies, a pioneer in customer-service software, in 1997.
Gianforte did what everybody told him couldn’t be done: On the fringes of large wheat fields, he built Right Now to take on global software giants like SAP and Oracle. Right Now had an IPO 2004. It grew to more than 2,000 employees and more than $200 million in revenue. In 2011, Oracle bought Right Now for $1.5 billion
That was all covered on the Rayno Report, and we even got the story CNBC — before Oracle acquired it. Right Now’s acquisition was bittersweet for the Bozeman, MT technology scene. It was sweet, because MT had it’s first billion-dollar-plus exit. It was also a bit bitter, because the Right Now signs came down on the company’s beautiful Stucky Rd. campus, and they were replaced with Oracle signs — the sign of Silicon Valley technology imperialism. Would the jobs stay?(Editor’s note: If you can’t tell, the Rayno Report is based in Bozeman, MT as well.)
Would Bozeman ever see a company like that being built again?
Gianforte’s optimistic on both counts. After he sold his biggest creation, pocketing three-digit millions, he is now hard at work on his charitable foundation as well as several local Montana startup efforts. As somebody who transplanted technology venture into a 40,000-person college town, he’s on the cutting edge of the rural technology entrepreneur movement, and he thinks it can grow. To that end, he started Bootstrapmontana.com, which finds seed funding for rural entrepreneurs.
How did Gianforte end up starting Right Now in Montana? After all, he’s from New Jersey, and he worked in the heart of the telecom industry at Bell Labs. The answer is this: He wanted to prove you could run a “world-class technology company” from the rural heartland of America, away from the headaches and pretentions of the large coastal areas. So clearly, Gianforte is a good person to turn to about both technology startups and business in general. I recently met up with him in a Bozeman coffee shop Cold Smoke (best latte in Southwest Montana) to hear his story. Here’s the Q&A:
Rayno Report: You’re a big proponent of bootstrapping. Given that many technology startups have started with venture capital, tell us how bootstrapping works.
Greg Gianforte: I’ve started five companies using bootstrapping. [At the beginning of Right Now], we did raise a little money, but that was in the 1990s when the valuations were huge and the VCs (venture capitalists) were throwing money around.
There are two ways to start a business, [a bunch of people] will say you write a business plan and start raising money. What they don’t say is that’s when you have a bonfire and you throw a bunch of money in it and hope there’s a business plan left when you’re done.
Less than 1% of startup companies raise money. What do the rest do? They use customer money to start. It’s a lower risk way to start a business. It forces you to deal with the reality of the market. And the entrepreneurs keep most of the company. I can’t tell you how many entrepreneurs I know that own only 5% of the company they started. Typically, outside Silicon Valley, Boston or New York, you can grow a very successful business, get to 20 or 30 employees. If you took professional money you will be forced to sell the business. These days if you can’t get to $50 million revenue with a plan to get to $150 million, you can’t go public. That only leaves selling the business, Most companies in the heartland are not candidates for professional money.
RR: Fascinating. Where did you get those numbers, 1%?
GG: You just have to look at government databases about the number of companies started every year. Very few of them are backed by venture capital.
RR: You were already a very successful East-Coast entrepreneur. Why did you pick Montana for your next business?
GG: I had this idea that Internet removed geography constraint to run a business. We wanted to see if we could build a world-class business in a rural community. I’d been coming out here a while. So, [my family] came out here. It was the best decision we’ve ever made. I did have some VCs delete me from their contact lists when they heard I was moving to Montana. But one of those investors ended up becoming a Right Now investor, and they had to get a NetJet share.
RR: Right Now became famous for bringing the term “Customer Experience” to market. How did that come about?
GG: Back then it was called knowledge management. We had about 30 patents in knowledge management, so we wrapped it into a customer-service solution.
RR: And basically you were taking on giants like SAP, Oracle, and Salesforce.com. Tell us how you got ahead against them.
GG: We made three strategic decisions. We decided to be hosted only, SAAS (Software as a Service). That was a huge advantage over Oracle and SAP in terms of total cost of ownership. Second, we were going after large enterprise only — no middle market. A number of the emergent SAAS firms were trying to be everything to everybody. There is a stage in your growth up to $100 million in revenue, where you’re really scrappy and agile. You can buy pizza and everybody stays late. But then you get into an no-man’s land, between $100 million and $350 million, where you lose the scrappiness but you don’t yet have the economies of scale.
You have to get through that no-man’s land, because it’s not a place you can stay. The way you get through that, you obtain the scale and economics early. The only way you do that is extreme focus. If you are trying to be certain things to certain people. By being SAAS only, enterprise only, then we realized we wanted to take a hill that had nobody was on top of it. Salesforce focused on sales-force automation for the masses. Most of those companies were business-to-business organization. Of our top 50 customers, 48 were B-to-C (business to consumer). In that market, salesforce automation is called e-commerce. The person that carries the big stick in B-to-B is the VP of Sales. In the B-to-C market, it’s called customer experience and it’s run by the VP of marketing.
The third decision was to focus on large business-to-consumer organizations, follow their problem of customer experience. Over a five-to-six year period we saw a big acceleration, the size of deals increased. When we were bought by Oracle we were doing $25 million deals a quarter. It was still the same product but we refined it quite a bit.
RR: Are you still involved at Oracle?
GG: I helped them through the beginning of this year. But after the deal, I didn’t have any operational role.
RR: Any Larry Ellison stories?
GG: [Smiles]. Maybe another time — over beer.
RR: What is happening to the Right Now jobs here in Montana.
GG: We were the largest commercial employer in Bozeman. I’m proud of the fact of the 1,100 or so employees in Montana, all of them got full time offers. The people that left did so because they wanted to.
RR: What’s Oracle going to do with Right Now?
GG: This is very important for them. They have broadened the focus and that’s creating opportunity.
RR: Some people say you sold because you took the company as far as you could in Montana. Was there a gate to getting bigger here in Montana?
GG: No, there was no ceiling on us. We had 22 offices around the world. We put the things that make sense in Montana, even though none of our customers were here. One of our advantages was corporate culture. There is a heartland work ethic that doesn’t exist in San Francisco or New York.
In Montana we have an expression, “Well, we’ll get ‘er done.” When it’s harvest time and the tractor breaks, you don’t form a committee or call a consultant, you fix the tractor. Here in Montana, it’s not what you’ve done, it’s your character.
RR: So are there other startups in Southwest Montana that you see with promise?
GG: I see some and I’m working with some. There’s Goomzee, which produces mobile applications for real-estate agents. They don’t have big scale yet. It’s a mobile MLS service. I work with Wisetail, which is revolutionizing the way employee training is done. Its target market is large hotel and restaurant chains.
There there’s TEXbase — it’s been here 13 years. Our president is Wayne Huyard, he was president of MCI. Now he lives here in MT and he’s in a 10-person startup. They deal with textile firms dealing with compliance issue [Huyard was formerly COO at Right Now, and Gianforte is on the board of TEXbase].
RR: Thanks Greg.