Six leaders in information technology gave their assessment of the sector, and what it takes to succeed, during IBJ’s inaugural Technology Power Breakfast March 10 at the downtown Marriott. IBJ reporter Chris O’Malley moderated the session.
Don Aquilano, managing director of Allos Ventures and Blue Chip Ventures.
David Ferguson, Ball State University’s associate vice president of emerging media and executive director of the Center for Media Design.
Bill Godfrey, co-founder and president of Aprimo Inc., a marketing software company recently acquired by Teradata Corp. for $525 million.
Mark Hill, managing partner of Collina Ventures LLC and a former principal of banking software company Baker Hill.
Jim Jay, president and CEO of technology initiative TechPoint and TechPoint Ventures Inc.
Scott Webber, chairman and CEO of Volatus Advisors LLC and chairman and CEO of BidPal Network LLC. He is former CEO of Software Artistry.
The following transcript has been edited for space:
Ball State tech transfer: Dave Ferguson, could you give us a couple of examples of how Ball State has engaged with business to develop or advance commercial applications of new technology?
Ferguson: We’ve just launched a vehicle to help some of that happen. It’s called the Ball State Innovation Corp. It’s headed by Will Davis [co-founder of Ontario Systems]. My center works with Will and with the Innovation Corp. to find technologies on campus and make them available widely.
One is called Military to Market. That’s actually a group of entrepreneurship students working with Crane [Naval Surface Warfare Center] researchers, and they’re mining [intellectual property] that’s been sitting on the shelves forever, and they’re finding applications. We’ve actually got one startup that’s come from that.
On another front, we’re heavily invested in Web-based visual learning environments that we think are going to replace the college textbook, or any textbook. That’s going to be a revolution in publishing. It’s just around the corner. We’re, in fact, working on a business plan to launch a company in the fall, we think, around that idea.
Probably a third area that some of you may have engaged is our pretty well-known applied media research center, called Insight and Research, which is part of the CMD. Those folks have been engaging with corporate partners for about five years and the list of clients and partners is pretty interesting and prestigious, including CBS and NBC, ESPN, Time-Warner and local [companies] like ExactTarget.
Aprimo’s future: Bill Godfrey, you’re probably tired of this question, but why should we not assume, as with many acquisitions, that Aprimo’s identity will fade away? That its local operations and talent will be thrown to the wind?
Godfrey: Well, I can appreciate the question, so thank you for asking it—kind of the elephant in the room. Unfortunately, with a lot of local high-tech acquisitions, what you just described has been the case. The good news is, with Aprimo we’re looking at an acquisition that is not going to follow that typical course.
For one, we’re going to keep our operations and continue to grow and build them right here in Indianapolis. Teradata’s strategy in buying Aprimo is much different than a typical acquisition strategy. Many of you know Teradata. If you don’t, they are a leading provider of data warehousing software rated No. 1 by both Forrester and Gartner. What most people don’t appreciate about Teradata is that they have had for several years now a high-growth emerging software applications business that complements their core database product line.
And the strategy in buying Aprimo was to buy an operating platform that could become the global operating platform for all of Teradata’s software applications. And so Mike Koehler, who happens to be the CEO of Teradata, who I work for—he point-blank has told me repeatedly, “Bill, treat this as a reverse merger. Not Teradata as a parent company, but treat this as a reverse merger of Teradata’s software applications business.”
So the net result of that, on Jan. 24, when our acquisition closed, literally overnight Aprimo has grown from 450 team members or employees to over 750. Overnight, we grew from 250 customers to over 500 customers. We went from two product lines to now managing five product lines. Our revenue has doubled. All of that is centered right here in Indianapolis.
And another good piece of news is that the Aprimo brand is not being set aside, it’s not being thrown into the wind, so to speak. The Aprimo brand is being kept and it’s being invested in and it is now the global brand for all applications that Teradata and Aprimo … are going to be bringing to market.
As part of Teradata, we now have access to a balance sheet that is far stronger than the balance sheet that Aprimo could ever muster up as a private or, frankly, as a public company, which is going to help accelerate Aprimo’s M&A strategy. We now have sales and distribution in over 60 countries around the globe.
This morning, we closed our first deal in Poland. Poland’s largest banking institution is now an Aprimo customer. … For all those reasons I think the future of Aprimo right here in Indianapolis has never been brighter.
IBJ: With hundreds of millions of dollars flowing into town from the Teradata deal, you’ve made some millionaires out of some folks. Do you see that paying dividends locally, with that money turning around?
Godfrey: I do. That question may be more appropriate to ask of a few of the investors of Aprimo who are up on the panel with me. Look at the profile of the people who made the dream come true, the team members of Aprimo. People like Scott, Mark, Don—we spend our professional careers envisioning, building and ultimately finding successful outcomes for high-tech, high-growth companies.
So given our natural orientation and given that the majority of the profits did fall back into the hands of our investors and employees, I fully expect that at least a decent percentage of that will be reinvested into the next generation of high-tech startups right here.
You know, it’s interesting to think back. I’m always amazed at how this family tree of high-tech companies continues to branch out. You referenced going back to 1998, which is when we co-founded Aprimo. That was on the heels of Software Artistry getting acquired by IBM, which Scott Webber architected, which was certainly a shaping event in our high-tech community. That was a $200 million sale.
I think back to the original vision that the founding team at Aprimo had, which was, simply put, to revolutionize the way marketing could be run through automated systems. And forward to today—we’re sitting, literally, in the mecca here in central Indiana of being the measured marketing technology hub. That’s pretty exciting.
And you just follow these branches of the family tree, well before Aprimo getting acquired, we have had many former employees and team members who are now running or who have started other high-tech companies, like PolicyStat, Jesubi … to name just a few.
So I expect that this snowball effect is going to continue and I’m happy that the Aprimo outcome can be a catalyst to that.
Local industry evolution: Mark Hill, I don’t want to suggest that you’re a relic or anything like that …
Hill: That’s Scott [Webber].
IBJ: … but you’ve been doing this since at least the ’80s, which is like the Cretaceous Period for Indianapolis high-tech. And you’ve seen the software community change a good deal. How has the local software community changed since the time Bill Godfrey was raising funds for Aprimo?
Hill: I think that when Don Brown [now CEO of Interactive Intelligence] and Scott took Software Artistry and sold it for $200 million to IBM, people were thinking, “Well, you know, maybe that was an aberration. You know, maybe Scott got lucky.” We know that’s not the case.
Since then, if you think about some of the companies that have had success—between PAN Testing and Angel Learning, Angie’s List, Interactive Intelligence, ExactTarget, Aprimo—these are all larger, big successes that have driven cash back into the community.
And you think about the number of employees that we had. You know in 2000 versus the number of employees today that are part of the tech community, it’s an order of magnitude.
There’s 10 times as many people in that business. There’s 10 times the amount of wealth that there was just 10 years ago. So it’s a much different environment today.
Collina Ventures: Mark, where does Collina intend to focus its time and money in the months ahead and where do you advise that startups look for funding these days?
Hill: Typically, we’re interested in early-stage, technology-focused companies. A lot of the stuff that Don looks at I look at as well, and generally a little earlier than Don. There’s all kinds of young software companies and I think there’s plenty of opportunities—not quite as many as I’d like to see.
Typically, people think about funding in terms of the funding as the end goal. Funding is the beginning. So oftentimes, people are looking at getting funding to get their business started, but generally you really need to get that business started with your own funding, with friends and family.
As Bill started his company, he did it with his own funding, went to friends and family and then expanded it to angels. So there’s a process that says you’ve got to get started with money that’s closer to you and, over time, angels. And then, if you’re really wildly successful, Don might even consider investing in you.
Common mistakes: Scott Webber, are there some common mistakes that you see technology firms making, especially in the early years?
Webber: Well, first of all, there’s a mistake here in terms of a few people on this board discussing the dinosaur issue relative to me. So I want to dispel that right away. I’m the only guy on the board here who is dressed like a tech. [Stands up to show he’s wearing jeans.]
So absolutely, when you look at tech companies, there’s kind of a dichotomy that occurs right from the get-go and that is, there’s a dichotomy in that the people who generally found these technology companies are from the tech community. They are very intrigued and driven by driving technology forward. Therefore, the primary thing they think about is the product … They get this product along and it’s 80-percent complete and a whole new idea pops up and they create another product.
I guess the mistake I would say I’ve seen and, quite frankly, the thing I usually do when I invest or come to a company, is more often than not I’ll come in and kill 80, 90, 95 percent of the product that’s on the shelf.
Because, if you think about successful companies, they usually start by being very successful executing and marketing one product. It worked pretty well for Oracle. It worked pretty well for Microsoft, for Google.
So I think that is the key thing entrepreneurs will tend to look at, technology entrepreneurs, will tend to think that the technology is the thing to focus on. And the more the better. When [you] get technology that’s strong and has some excitement to it … focus on the execution—the building of the organization and driving that product successfully down the path.
It’s very difficult to fund and support, not only from a financial perspective but the resources in terms of just the people, trying to focus on a broad array of products and continue movement of that product. You may have great product, but you’re probably not going to win the war.
Startup resources: Are there some things that could be done to help a lot of these emerging companies—some resources they may want to turn to?
Webber: Well, there are resources. There are groups like HALO, like TechPoint, universities. But I think it starts with having a mentality, one of not only saying, “Gee, it’s not just about the product.” One of the other key things I look at for the companies I get involved in is, it’s a lot easier to be successful getting to where you want to get to if you’ve been there before.
So if you’re a young entrepreneur who’s never, ever built a company, why would you think that you’re really going to be good at doing it? So bringing in management talent that’s done what you want to do is kind of the key thing so you can go to organizations like HALO.
They’re going to provide you guidance. But the real key is bringing some people into your organization that have done what you need done. As an example, Bill would continually look in the market and say, “Gosh, we’re at a size where I need a CFO that can do these kinds of things.”
And he’d go out and get a very high-talent person to come in and fill that role. I mean that’s what then would allow that accelerated growth. Organizations like HALO, I think the VCs in the area can help connect some of these folks to some of that talent and make that happen.
TechPoint priorities: Jim Jay, do you have some perspectives on where things are going and TechPoint’s top priorities for the next year or two?
Jay: The measured marketing initiative is an initiative that we stood up last year that has just great energy behind it. We have this corpus of businesses in central Indiana that are focused on return on investment-driven marketing. It’s a unique cluster as we look across the nation. We’ve been able to garner national press on this core group of businesses, attracting work force, attracting more capital, and certainly we want to attract more companies to Indiana to do business around other like businesses. So that’s certainly one area that we see that will continue to grow.
Our work with HALO Capital Group, 2-1/2 years ago—we’ll continue to invest. We have an eager group of technology-savvy investors ready to do that. So we continue to see those as great opportunities for growing. We also are very involved in the Orr Fellowship, and several of the Orr Fellows are here today, which is focused on attracting the best and brightest graduates out of Indiana’s universities and putting them in place in very highly engaged entrepreneurial environments. Today, we have 27 tech companies that host Orr Fellows following their graduation.
IBJ: You have also started to cultivate medical IT. How is that progressing?
Jay: We have an initiative that’s called ALHIT. Al Givens of our board has been very involved in that, as has Ice Miller and Clarian and Wishard and Regenstrief and BioCrossroads. It’s really a pulling together of this existing medical community to stimulate dialogue on what the care giver needs with respect to, how can we best assist in providing the best care possible to the patient? And then bringing in the tech entrepreneur, the programmer, that has typically taken an idea and kind of said, “Hey, I’ve got this idea, medical provider, will you take it?”
We’re trying to reverse that model to understand what the care giver actually will use versus the reverse and bringing solutions to the medical community that are technology-driven solutions.
Most recent discussions are, how can you take the tablet and bring it to the bedside of the patient with the information that the doctor needs, a dashboard, if you will, that has all the vitals that are critical to that patient’s care?
Social media: Dave, how is social media and cloud computing transforming the industry as well as ordinary business?
Ferguson: Well, just to give some perspective on the social media side, I did a little digging for a few stats and it’s really astounding even for those of us who live in this world. Nine in 10 U.S. Internet users use social media sites at an average of four hours or more a month. Facebook, as most of you know, has over 500 million users. In December 2010, 50 billion minutes were spent on Facebook and that was an 80-percent increase over the previous year. Twitter grew 1,400 percent last year.
The mobile platform is going to be the preferred platform over the PC. Three out of four business folks are looking at social media as an increased investment in the coming year. So it’s forcing us into some new strategies. Fortunately, Indianapolis with its measured marketing and other marketing orientations is getting it ahead of some other parts of the country. But it truly is shifting the way we think about our engagement with our end user.
Webber: I’d say social media actually has some broad-base utilization that perhaps people aren’t taking advantage of. Certainly things like LinkedIn … it’s the only way we look to hire people anymore in the companies I’m involved with. It’s the only rational way to use.
But if you use some of the tools that are out there—competitors will do things like announce new customers, potentially. Well, if you’re smart about it, you may be able to find out all your competitors’ customers and use that as a marketing campaign.
So by the same token, you have to be careful that you’re not also laying information out there that can be used by your competitors.
There’s just such a wealth of information that’s out there that’s available to all of our companies to take advantage of the social networking technologies in extraordinary ways.
Hill: I’ll speak a bit to cloud. It’s this word that seems to have taken over and has lots of different meanings to lots of people. I mean software-as-a-service has also become cloud. So if you think about cloud companies, maybe you think of sales force [.com]. From my perspective, cloud is more of an infrastructure-as-a-service. [It’s] the idea that says, I’m going to take what I’ve traditionally done with servers and, rather than purchasing servers, I’m going to provision those servers and somebody else is going to manage them for me.
That’s a business I’m involved in, called BlueLock. [It] has really a lot of attraction just around the idea of outsourcing something that I’ve routinely had to do myself. So I bought the equipment but more so I’ve had to manage all of that equipment. So for a variety of companies, the idea of just outsourcing that whole piece is attractive. What cloud essentially does is allow us the opportunity to outsource a lot of things that traditionally had to be done [in-house].
When we started Baker Hill, we would sell software that would run on a PC or a server. Our customers had to manage that. Every time we had an upgrade, we’d send that upgrade out to a thousand of our banking clients. They had to go through the process of upgrading, converting a lot of work to be done to manage that. They had to manage the servers, the infrastructure.
Well, now, with software as a service and infrastructure-related cloud activities, all of that gets outsourced to somebody that can focus on it. So you get a real efficiency. And I think we’re going to just see that very much continue, particularly as you look at business IT.
Aquilano: I think it really helps young startup companies, in fact both cloud and social media. With social media you can have these younger startups having a much greater presence than they really deserve if they’re really smart about it and put a lot of energy about it and are really creative about it.
With respect to cloud, the last thing you really want young companies doing is trying to create their own structure and spend time on IT. You’ve got a product to build. You’ve got to think about [how] to interact with your companies, put that out in cloud, make that a variable cost.
From an investor, that’s what we want. We don’t want this large albatross messing with capital expense where you have to sort of get to a certain size to pay the bills. So I think both of those actually are going to allow these young startup companies to really get off the ground quicker and more efficiently.
Local worries: Have you some worries about the local tech economy? Maybe a lack of talent or funding remains an impediment?
Hill: In 2000, we wondered whether we had the talent and the financial resources to build a tech community. We look in the rearview mirror and, with the track record we have, I think we’ve demonstrated that we can do it and will continue to do it.
I don’t worry about whether or not we have the talent, the resources, the financing—any of the expertise that we need to continue to grow the sector.
Webber: The difference between an Aprimo and some company that we haven’t heard of in this community, it’s probably not the quality of the product. It’s the quality of the management team. And with Bill, whether he could find the money to fund Aprimo locally didn’t matter. He could go to Chicago. He could go to the coast. A good management team with good ideas can find funding anywhere. And so once again, build the company. It’s kind of a “Field of Dreams” thing. Build the company with the right components—which isn’t just product, it’s that ability to execute—and they will come.
Jay: As we look at companies to invest in or you look at the companies that are growing in the state, there is continued need for work force. So there are opportunities, and it’s not just someone that knows programming. That’s a huge demand. But it’s somebody that understands how a tech company makes money, understands how a software company returns investment to the bottom line. You have to have that understanding, but there are opportunities in finance and project management and sales across these companies equally, so that shouldn’t get lost on a tech discussion about work force—that it’s only somebody that knows how to program.
Scott’s point is right on. [When] we need to look at investments from a HALO standpoint, we can talk with an idea person that doesn’t have any idea how to execute. So we need to continue to match the ideas with good execution talent.•